1)A firm provides a service to its clients. Let P be the price charged for the service. The demand curve for each client is P=20-0.1Q and the cost curve is C(Q)=10+2Q.

a)If the firm charges a single price for the service, what is the optimal price and quantity Q for the service? Compute the profit per customer. [5 marks]

b)Explain two-part tariffs and its applications. If the firm charges a two-part tariff, what is the optimal up-front fee, the price P and quantity Q per customer? What is the profit per customer in this case? Explain. [5 marks]