A local video store estimates that their average customers, Microeconomics

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A local video store estimates that their average customers

A local video store estimates that their average customer's demand per year is P = 3.5 - .05Q (all customers are identical), and knows that the marginal cost of each rental is $0.5. How much should the store charge for an annual membership (M) and how much for each rental (R) if it uses an optimal two-part pricing strategy?

A. M = $4.5 and R = $2

B. M = $5 and R = $1

C. M = $9 and R = $0.5

D. M = $12.25 and R = $0

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