DrexelBoard wants to start a hoverboard sharing service inPhiladelphia (much like Zipcar, only with hoverboards instead ofcars). There are two types of potential customers: youngprofessionals, each of whom has annual demand that is given byQprof = 50 – 2p, and students, each of whom has annual demand thatis given by Qstudent = 25 – p. In each case, Q is measured in tenminute increments of hoverboard rental time and p is the price indollars. DrexelBoard’s cost function is 5Q, where Q = Qprof +Qstudent. Assume that there is only one young professional and onestudent in the market (the results you will find would generalizeto any number of users, as long as they existed in equalproportions).

(a) Suppose that DrexelBoard was interested in instituting atwo-part tariff only for the young professional in which it chargesan annual membership fee for the right to purchase hoverboardrental time from the company as well as a usage fee for each tenminute rental purchased. What would be the profit-maximizingmembership fee and the usage fee to charge the youngprofessional?

(b) What would be DrexelBoard’s economic profits if it onlyserved the young professional using the two-part tariff you solvedfor in part (a)?

(c) Show mathematically and explain in words why the studentwould not be willing to pay the membership and usage fee you solvedfor in part (a).

(d) Solve for the profit-maximizing two-part tariff (i.e., themembership fee and usage fee) that both the student and the youngprofessional would be willing to purchase. Round your answers tothe nearest cent.

(e) Putting both the young professional’s and the student’sdemand curves in the same graph (with price on the y-axis andquantity on the x-axis), illustrate the two-part tariff you derivedin part (d).

(f) What are DrexelBoard’s economic profits with the two-parttariff you derived in part (d)? Comparing these profits to thoseDrexelBoard earned from only serving the young professional(derived in part (b)), should DrexelBoard price to sell to bothconsumers or just to the young professional?