# Answer to Question #56785 in Economics of Enterprise for yousef

Question #56785

You have been asked by your boss to report on the expected profits from a single

price strategy compared with a two-part pricing strategy. The estimated demand

for the firm’s product is:

Qd = 400 - 0.2P.

Per unit cost is estimated as constant at $1,000.00. Provide a report which

explains the profits from a single price profit maximizing strategy with a twopart

profit maximizing strategy involving a fixed fee plus a per unit fee. Assume

that total fixed cost is $30,000. What is the optimal fixed fee? Why does the twopart

pricing policy increase total profits? (20 marks)

price strategy compared with a two-part pricing strategy. The estimated demand

for the firm’s product is:

Qd = 400 - 0.2P.

Per unit cost is estimated as constant at $1,000.00. Provide a report which

explains the profits from a single price profit maximizing strategy with a twopart

profit maximizing strategy involving a fixed fee plus a per unit fee. Assume

that total fixed cost is $30,000. What is the optimal fixed fee? Why does the twopart

pricing policy increase total profits? (20 marks)

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