Answered: E1 (a) If the golf course wishes to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

(a) If the golf course wishes to implement a two-part pricing model, what membership fee will maximize revenue for the golf course? Please show your calculations.

(b) How many rounds of golf will Joe play per year (calculate the value of Q*)? Please explain.

(c) Would someone who just occasionally plays golf (perhaps 1 or 2 rounds once every 2 months) prefer two-part pricing as given above, or would they prefer to pay a price of $100 per round without any membership fee? Please explain.

Joe has moved to a small town with only one golf course. His demand curve is P = 120 – 2Q
where Q is the number of rounds of golf he plays per year. The manager of the golf course offers
Joe a special deal, where Joe pays an annual membership fee and can play as many rounds of
golf as he wants to at $20 per round. The golf course's Marginal Cost is $20.
P
$120
$20
demand curve is P = 120-2Q
MC=AC

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