Each year a new group of high school seniors chooses where they want to attend college. The college faces two identifiably different categories of customers, in-state and out-of-state students. The (inverse) demand equation for in-state students is given by PI=$9000- QI, while demand by out-of-state students is given by PO= $21,000 -9QO. P represents the annual tuition charged by the college and Q represents the number of students who enter as freshmen. The marginal cost of educating an additional student is constant and equal to $3000. Suppose that the Board of Trustees wants to act as a profit-maximizing monopolist in setting price and output. What tuition should they charge for in-state and out-of-state students, and how many of each would enroll each year?
Each year a new group of high school seniors chooses where they want to attend college. The college faces two identifiably different categories of customers, in-state and out-of-state students. The (inverse) demand equation for in-state students is given by PI=$9000- QI, while demand by out-of-state students is given by PO= $21,000 -9QO. P represents the annual tuition charged by the college and Q represents the number of students who enter as freshmen. The marginal cost of educating an additional student is constant and equal to $3000. Suppose that the Board of Trustees wants to act as a profit-maximizing monopolist in setting price and output. What tuition should they charge for in-state and out-of-state students, and how many of each would enroll each year?
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