Question
All individual golfers have the same monthly demand for golfing at the Riviera Gold Club given as P = 5 - (1/2)Q where P is
All individual golfers have the same monthly demand for golfing at the Riviera Gold Club given as P = 5 - (1/2)Q where P is price per round of golf and Q number of rounds played per month. Marginal revenue is MR = 5 - Q. The Riviera faces a constant marginal cost MC = $1. The Riviera acts like a monopoly in setting its pricing. Illustrate your answers below with a graph.
a. The Riviera has a two-part pricing strategy where it sets a price per round of golf played plus a monthly membership fee. Find the profit-maximizing price P, number of rounds played Q, membership fee, and profits for the Riviera.
b. What is the deadweight loss (inefficiency) associated with the two-part pricing in part a? Explain.
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