3. A Tennis Club has asked you to devise a profit-maximizing pricing strategy. It is known that a typical player's demand is given by P =40-20, where P is the price of 1 hour court time on the club's indoor tennis court, and Q is the number of hours of court time an individual player would demand during the tennis season. The marginal cost of 1 hour of court time is $2 and that fixed costs are practically zero. a) Calculate the profit-maximizing price and Tennis Club's profits (per player) assuming a per-unit price is charged each customer. b) Determine the profit-maximizing price and Tennis Club's profits (per player) assuming a two-part pricing strategy is adopted for each customer. Your answers: a) per-unit price strategy price profits b) two-part pricing strategy price profits

3. A Tennis Club has asked you to devise a profit-maximizing pricing strategy. It is known that a typical player's demand is given by P =40-20, where P is the price of 1 hour court time on the club's indoor tennis court, and Q is the number of hours of court time an individual player would demand during the tennis season. The marginal cost of 1 hour of court time is $2 and that fixed costs are practically zero. a) Calculate the profit-maximizing price and Tennis Club's profits (per player) assuming a per-unit price is charged each customer. b) Determine the profit-maximizing price and Tennis Club's profits (per player) assuming a two-part pricing strategy is adopted for each customer. Your answers: a) per-unit price strategy price profits b) two-part pricing strategy price profits

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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