You are the manager of a monopoly. Your analytics department estimates that a typical consumer’s inverse demand function for your firm’s product is P = 350 −40Q, and your cost function is C(Q) = 190Q.
a. Determine the optimal two-part pricing strategy.
Per-unit fee: $
190
Fixed fee: $
480
b. How much additional profit do you earn using a two-part pricing strategy compared with charging this consumer a per-unit price?
$
