3. Pindyck & Rubinfeld, 8e. Ch. 11, #9. 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 1 10 academic institutions. Each business customer has the demand function Q = 10−P, where Q is in millions of seconds per month; each academic institution has the demand Q = 8 − P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. (a) Suppose you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? (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? (c) Suppose you set up one two-part tariff—that is, you set one rental and one usage fee that both business and academic customers pay. What usage and rental fees would you set? What would be your profits?

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Asked Dec 11, 2019
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3. Pindyck & Rubinfeld, 8e. Ch. 11, #9. 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 1 10 academic institutions. Each business customer has the demand function Q = 10−P, where Q is in millions of seconds per month; each academic institution has the demand Q = 8 − P. The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. (a) Suppose you could separate business and academic customers. What rental fee and usage fee would you charge each group? What would be your profits? (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? (c) Suppose you set up one two-part tariff—that is, you set one rental and one usage fee that both business and academic customers pay. What usage and rental fees would you set? What would be your profits?

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a) (Maximum willing to pay price-Total unit) xA ctual price Consumer surplus, Facademic institution (8-2)x6 -글36) =18millions of seconds per month Each customers to charge 18millions of seconds per month for fee. Thus, each customer will earn 180,000 per month. The total profit would bel,800,000.

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(Max imum willing to pay price- Total unit) Consumer surplusBusiness custom ers xActual price -(10-2 )x8 -1(62) =32milli ons of seconds per month Each customers to charge 32millions of seconds per month for fee. Thus, each customer will earn 320,000 per month. The total profit would be 3,200,000.

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Total profit =1,800,000+3,200,000 =5,000,000

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