The demand for health club services is Q = 350 2P and the marginal cost of provi

Question

The demand for health club services is Q = 350 2P and the marginal cost of providing these services is MC = 110 + 2Q. If a two- part tariff pricing system is used, what is the optimal price and quantity combination?

A. P = 52 and Q = 240.

B. P = 199 and Q = 52.

C. P = 26 and Q = 162.

D. P = 162 and Q = 26.

The demand for health club services is Q = 350 2P and the marginal cost of providing these services is MC = 110 + 2Q. If a two- part tariff pricing system is used, what is the optimal price and quantity combination?

A. P = 52 and Q = 240.

B. P = 199 and Q = 52.

C. P = 26 and Q = 162.

D. P = 162 and Q = 26.

Explanation / Answer

in two paert tarrif system we produce till p = mc

thus

Q = 350-2(110+2Q)

Q = 350-220-4Q

SO 5Q = 130

SO Q = 26, at this Q we can see that MC = 162

NOW we can see that the prioce charged is 162 and q = 26

so answer is D

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