You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number—10 businesses and 10 academic institutions. Each business customer has the demand function: Q=14−P, where Q is in millions of seconds per month; each academic institution has the demand: Q=10−P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. a. Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? (Round all answers to the nearest integer) For business users, the rental fee would be$720,000 per month and the usage fee is 2 cents per second. For academic institutions, the rental fee would be $320,000 per month and the usage fee is 2 cents per second. SC's total profits are $10,400,000 per month. I need help with this part: b. Suppose you were unable to keep the two types of customers separate and charged a zero rental fee. What usage fee would maximize your profits? What would be your profits? The profit maximizing usage fee is_cents per second. (round your answer to two decimal places) SC's profits are $_per month. (round your answer to the nearest dollar)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number—10 businesses and 10 academic institutions.

Each business customer has the demand function:

Q=14−P, where Q is in millions of seconds per month; each academic institution has the demand: Q=10−P.

The marginal cost to SC of additional computing is 2 cents per second, regardless of volume.

a. Suppose that you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? (Round all answers to the nearest integer)

For business users, the rental fee would be$720,000
per month and the usage fee is 2 cents per second.

For academic institutions, the rental fee would be

$320,000 per month and the usage fee is

2 cents per second.

SC's total profits are $10,400,000 per month.

I need help with this part:

b. Suppose you were unable to keep the two types of customers separate and charged a zero rental fee. What usage fee would maximize your profits? What would be your profits?

The profit maximizing usage fee is_______cents per second. (round your answer to two decimal places)

SC's profits are $_______per month. (round your answer to the nearest dollar)

Expert Solution

Step 1

Demand for the two types of customer (both having 10 customers per types)

Academic institution Q= (10)(10-P)

Business Q= (10)(14-P)

Marginal Cost = 2

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