Merriwell Corporation has a virtual monopoly in the ultra high speed computer market. Merriwell has recently introduced a new computer that will be used by satellite installations around theworld. The installations have identical demands for the computers. Merriwell's managers have decided to lease rather than sell the computer, but they have been unable to decide whetherto use a single hourly rental charge or a two-part tariff. Under the two-part tariff, users would be levied an access charge plus an hourly rental rate. Merriwell's marketing staff estimates ademand curve for each potential user given by P = 45-0.025Q where P = price per hour of computer time, and Q = the number of hours of computer time leased per month. Merriwell offerstheir users extensive maintenance assistance and technical support. The firm's engineers estimate that marginal cost is $30 per computer hour. Assume fixed costs are zero.If Merriwell charges a single rental rate, the optimal rate isv $/hour and the optimal quantity isv. Merriwell's profit in this case is $If Merriwell uses a two-part tariff, the access charge is $v and the hourly rental rate would bev $/hour. In this case, Merriwell's profit is $

Solution:- (I) With single pricing, MR = MC. TR = PQ = 45Q - 0.025Q2 MR = dTR/dQ = 45 - 0.05Q 45 -…

Answered: Merriwell Corporation has a virtual…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the case of a monopolist who charges the same price to all consumers. The demand for the good is given by Q=1282168p-7, where Q denotes the quantity demanded at price p. The firm's total cost of producing Q units is given by the function C(Q) = 7 Q What is the profit maximizing price for the monopolist? (As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number.)
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