Reference no: EM131727965

Frank is a handy man, meaning that he does plumbing, carpentry, and various odd jobs for hire. All of Frank's current customers have the same demand for his services, which is given as follows: P = 20 - 0.25Q, where Q is the number of hours that Frank works for the customer each year and P is the price that Frank charges in dollars per hour. In addition to this hourly charge, Frank also requires each customer to pay a yearly service fee that is supposed to compensate him just for coming out to the house. This service fee is fixed and does not depend on the number of trips made during the year. The marginal (opportunity) cost of supplying each hour of work is ten dollars per hour. What price should Frank charge for each hour of work? What service fee should he charge? Explain the logic behind your answers.