Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost...

Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost is MC = $20.

a. Suppose the firm applies the two-part pricing strategy. Compute the fixed fee, variable (per unit) fee, output, revenue and cost associated with this pricing.

b. What type of businesses should consider implementing the two-part pricing strategy? Please explain.

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Expert Solution

Rahul Sunny answered 1 year ago

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