Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 2. Two-Part Pricing You are an executive for Aztechnology, Inc. (AZ), which rents out super computers. AZ receives a fixed rental payment per time

Problem 2. Two-Part Pricing You are an executive for Aztechnology, Inc. (AZ), which rents out super computers. AZ receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P pesos per second. AZ has two types of potential customers of equal number10 businesses and 10 academic institutions.

Each business customer has the demand function Q=10-P, where Q is in millions of seconds per month; each academic institution has the demand Q=8-P. The marginal cost of additional computing is 2 pesos per second, regardless of volume.

a) Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits?

b) Suppose you were unable to keep the two types of customers separate and charged a zero rental fee. What usage fee would maximize your profits? What would be your profits?

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

Global Marketing

Authors: Johny K Johansson

4th Edition

0072961805, 9780072961805

More Books

Students also viewed these Economics questions

Question

16. Use Exercise 15 to show that P(E F) = P(E) + P(F) P(EF).

Answered: 1 week ago