A Utility Company Faces Demand Given by Q = 40

question 69

Essay

A utility company faces demand given by q = 40 - 0.1p, where p is the price per unit.
a. If the company charges only one price, what price per unit will maximize revenue?
b. If the company adopts a two-tier pricing structure, what price per unit will maximize revenue?

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Definitions:

Agency Relationship

A legal and fiduciary relationship between two parties, where one (the agent) is authorized to act on behalf of the other (the principal) in business dealings.

Agent

A person who agrees to represent or act for another, called the principal.

Licensed Professional

An individual who has been officially authorized to perform certain specialized services or activities due to meeting specific governmental or professional standards.

Unlicensed Agent

An individual acting in a role that requires licensure, such as real estate or insurance, without possessing the necessary legal authorization.