Intended for low demand consumers is the most profitable

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Clearvoice is a wireless telephone monopolist in a rural area that serves 100 high-demand consumers, each of which has the following monthly demand curve for minutes of wireless service QHd = 100 − 100P , and 400 low-demand consumers each of which has the following monthly demand curve for minutes of wireless service QLd = 50 − 100P , where P is the per minute price in dollars. Clearvoice has a marginal cost of $0.10 per minute. Suppose it sells to both types of consumers, using a pair of two-part tariffs, with the plan intended for the high-demand consumers having a per-minute price of 10 cents, and the plan intended for the low-demand consumers having its minutes capped at the number a low-demand consumer desires to purchase given the per-minute price in that plan. Which of the following per minute prices in the plan intended for low demand consumers is the most profitable: 10, 15, 20, or 25 cents?

Reference no: EM13998764

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