Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A lawyer has two clients. She charges a yearly retainer plus a separate fee for each consultation. The retainer is a fee each client pays

image text in transcribed
image text in transcribed
A lawyer has two clients. She charges a yearly retainer plus a separate fee for each consultation. The retainer is a fee each client pays just to secure the services of the lawyer for the following year, and the consultation fee is the price the lawyer charges to do one legal job for the client. The clients' annual demand curves for legal jobs are Client 1: Q1 = 20-P Client 2: Q2 = 18-2P where P is the consultation fee in thousands of dollars for one legal job and Qi is the number of legal jobs done for client i. The lawyer's marginal cost for completing one legal job is 2.8 (also in thousands of dollars). The lawyer wants to determine the fee schedule (retainer and consultation fee) that will maximize her profit. She feels she cannot use a different fee schedule for each client, so she must set one retainer and one consultation fee that apply to both clients. A) She should charge a consultation fee of $ thousand per legal job. (Enter your response rounded to two decimal places) B) She should charge a retainer of $ thousand. (Enter your response rounded to two decimal places)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting for Non-Accounting Students

Authors: John R. Dyson

8th Edition

273722972, 978-0273722977

Students also viewed these Economics questions