Marginal cost to the club of a round of golf

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Reference no: EM13737845

A country club knows that each of its customers has a demand curve for golf rounds of q = 500 – p, where q is the number of rounds bought in a year and p is the price per round of golf. Furthermore, because it is so exclusive and there are not many members, the marginal cost to the club of a round of golf is essentially zero.

(a) Suppose the management of the country club charges a uniform price p^M per round of golf. Calculate the optimal price and the profit the club makes out of each of its members. (b) Now suppose the manager, upon taking an econ class, wants to design a two-part tariff: that is, each member would be charged a fixed fee F once a year and a price p_0 per golf round. What is the optimal level of the fixed fee F? What is the optimal level of the per-round price p_0 in this two-part tariff scheme? What is the profit the club makes out of each of its members with this two-part tariff?

Reference no: EM13737845

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