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Pricing policy increase total profits

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You have been asked by your boss to report on the expected profits from a single price strategy compared with a two-part pricing strategy. The estimated demand for the firm's product is:

Qd = 400 - 0.2P.

Per unit cost is estimated as constant at $1,000.00. Provide a report which explains the profits from a single price profit maximizing strategy with a twopart profit maximizing strategy involving a fixed fee plus a per unit fee. Assume that total fixed cost is $30,000. What is the optimal fixed fee? Why does the two part pricing policy increase total profits?

Reference no: EM13903467

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