Suppose that a consumer’s demand for a product is given by P = 80 – 2Q. A monopolist produces the product at constant marginal cost, where MC = $6. The firm has no fixed costs. Suppose the monopolist sets a two-part tariff for the good where the consumer must pay an amount T for the right to purchase the good, and then the consumer pays a price P for each unit of the good purchased.
a) What value of T and P should the firm choose if it wants to maximize its profit?
b) How much profit will the firm make?