Question: Merriwell Corporation has virtual monopoly in ultra-high speed computer market. Merriwell has recently introduced a new computer that will be used by satellite installations around the world. The installation have identical demands for the computers. Merriwell's managers have decided to lease rather than sell the computer, but they have been unable to decide whether to use a single hourly rental charge or a two-part tariff. Under the two-part tariff, users would be levied an "access charge plus an hourly rental rate. Merriwell's marketing staff estimates the demand function for each potential user to be:

Where P is the price per hour of computer time and Q is the number of hours of computer time leased per month. Merriwell offers their users extensive maintenance assistance and technical support. The firm's engineers estimate that marginal cost is constant at $30 per computer hour.

1. Assuming that Merriwell chooses to set a single price, what will the firm's price be?
2. Assuming that Merriwell uses a two-part tariff, what 'access charge' and hourly rental fee should the firm set?

Price: $2.99

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