Average consumer demand for your product is Q = 12 – ½P. Your marginal cost of production is constant, equal to 12 per unit. As part of a two part pricing strategy you form a buying club. Members of the club may purchase as many units of your product as they wish at a price equal to marginal cost. Setting the club membership fee equal to will maximize profit.

You are the manager of a large crude-oil refinery. as part of the refining process, a certain heat exchanger (operated at high temperatures and with abrasive material flowing through it) must be replaced every year. the replacement and downtime cost in the first year is $165 comma 000. this cost is expected to increase due to inflation at a rate of 7% per year for six years (i. e. until the eoy 7), at which time this particular heat exchanger will no longer be needed. if the company's cost of capital is 15% per year, how much could you afford to spend for a higher quality heat exchanger so that these annual replacement and downtime costs could be eliminated?