ECON 600 -MicroeconomicTheory

3. Joe has just moved to a small town with only one golf course. His inverse demand curve for golf 1s: P =160-2q where g 1s the number of rounds of golf that Joe plavs per yvear. The manager of the golf course negotiates separately with each customer who joins the club and can therefore charge individual prices. This manager has a good 1dea of Joe's demand curve and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $20, which is the marginal cost of his round of golf Assume no fixed costs. (a) What membership fee would maximize profit for the club? (b) How much extra profit does the club make by using a two-part tariff versus a single price per round of golf