Agnieszka runs a pub called the ‘Kontrast” which is frequented by many celebrities. Given the popularity and location of the pub, Agnieszka has a monopoly position in the market. Each customer’s demand curve for drinks per night is given by the following: P = 60 – 2Q. The marginal cost of each drink sold is $4. Agnieszka is considering imposing a cover charge on the pub. Essentially this is a fee that allows you into the pub after which you can purchase as many drinks as you like. If Agnieszka is a profit maximizing monopolist and knows the demand curve of each customer, what is the optimal cover charge that Agnieszka should charge so as to maximize profits?

$0

$60

$196

$247

$784