solutionsps9 - ECON 101 Introductory Microeconomics Prof...

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ECON 101: Introductory Microeconomics Prof. Carranza Homework 9 Due: December 11th, 2006 Answer Key Problem 1 : 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 10 academic institutions. Each business customer has the demand function Q = 10 - P , where Q is in millions of seconds per month; each academic instution has the demand Q = 8 - P . The marginal cost to SC of additional computing is 2 cents per second, regardless of volume. (a) Suppose that you could seperate 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 type sof customers seperate and charge a zero rental fee. What usage fee would maximize your profits? Wha twould be your profits Solution 1 : (a) MC = 2 and since usage fee =
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