The typical customer of an amusement park has a demand for rides of qD = 30 â 10PD where q is measured in number of rides and P in dollars per ride. a. Suppose the marginal cost of any ride is $2. How much should the amusement park charge in admission fee? Clearly explain.
b. Suppose instead the marginal cost of a ride increases with the overall number of rides according to the schedule MC = $2 + 0.001Q where Q is the overall number of rides. If the amusement park has 100 visitors, how much should the park charge per ride? How much should it charge as admission fee?
The typical customer of an amusement park has a demand for rides of qD = 30 â 10PD where q is measured in number of rides and P in dollars per ride. a. Suppose the marginal cost of any ride is $2. How much should the amusement park charge in admission fee? Clearly explain.
b. Suppose instead the marginal cost of a ride increases with the overall number of rides according to the schedule MC = $2 + 0.001Q where Q is the overall number of rides. If the amusement park has 100 visitors, how much should the park charge per ride? How much should it charge as admission fee?
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An amusement park is considering changing its pricing system from a pay-per-ride system to a single entrance fee entitles the entrant to unlimited rides. Assume that the park is not close to approaching the attendance capacity. The marginal value for rides for the typical entrant is listed below:
Quantity Marginal Value
|
1 2 3 4 5 6 7 |
2.50 2.00 1.50 1.00 0.50 0.10 0.00 |
a) Assuming that the marginal cost is zero to provide the rides to those in attendance, what is the best pay-per-ride price (consider only 50 cent increments)?
b) Suppose instead the park just charges an entrance fee. What is the profit-maximizing entrance fee?
c) Under which system are profits higher?
d) Under which system is ride usage higher?
e) If, instead, the marginal cost of providing a ride were $0.30, what revision in the pricing scheme, if any, would you suggest? (extra credit, you may skip this question without penalty)
