MB 515: Economic Theory and Application Problem Set 6 6.1 At Silverado Golf Club, the demand for rounds of golf by each one of the 140 identical senior golf members is given by D. in the figure below. Silverado's annual fixed costs are $1,250,000, and variable costs are constant and equal to $25 per round. 150 D SR : Pyx = 150-0.50 SH Price and cost (dollars per round) 25 SMC = AVC 300 Quantity (rounds per year) a. If the manager of Silverado charges a uniform green fee to all senior golfers, the profit- maximizing green fee is $_ per round. Under this uniform pricing plan, Silverado's annual total revenue is $ and total variable cost is $ Silverado's profit under uniform pricing is $ per year. b. If the manager instead decides to employ a two-part pricing plan, the profit-maximizing green fee is $_ per round, and the annual membership charge is $ The two-part pricing plan results in total annual profit of $ C. Which pricing plan-uniform pricing or two-part pricing-generates more profit for Silverado's owner? Is this the pricing plan you expected to be more profitable? Why or why not?6.2 Suppose Silverado Golf Club in question 6.1 also has a second group of 140 1dentical golfers, weekend players, who wish to play at the club. The demand for rounds of golf by each one of the 140 identical weekend golfers is given by D_ in the figure below. Assume the same cost structure as given 1 question 6.1. The manager designs an optumal two-part pricing plan for these two groups of golfers. 125 D, : B, =125-030,, Price and cost (dollars per round) 25 SMC = AVE 0 250 Quantity (rounds per year) a. The optimal green fee to set for each round of golfis b. The optimal annual membership charge is $ for senior golfers and $ for weekend golfers. c. Under this two-part pricing plan, Silverado's annmal profit 1s $ 6.3 A manager faces two separate markets and decides to price-discrinunate. The estimated demand functions for the two markets are 0=225040P, 0.=3,60090F, The long-run marginal cost 15 estimated to be IMC=24+00010 a. How many umits should the manager produce and sell? b. How should the manager allocate the profit-maximzing output between the two markets? . What prices should the manager charge in the two markets