Answer to Question #41544 in Microeconomics for ash
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 = 4000.2P.
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 two part 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 two part pricing policy increase total profits?