Suppose the local zoo hires you to assist them in setting admission prices. The zoo's managers recognize that there are two distinct groups of consumers for zoo admission: adults (A) and children/senior citizens (CS). The demand and marginal revenue functions for the two groups are as follows:
PA = 9.6 - 0.08QA MRA = 9.6 - 0.16QA
PCS = 4 - 0.05QCS MRCS = 4 - 0.10QCS
Suppose the zoo is large enough so that crowding is not a problem at the zoo. The managers, therefore, consider the marginal cost to be zero. Answer the following questions:
A) If the zoo decides to price discriminate, what are the profit-maximizing price and quantity in each sub-market? Calculate the total revenue for each sub-market.
B) If the zoo decides not to price discriminate, it faces a combined demand and marginal revenue function of P = 6.15 - 0.03Q and MR = 6.15 - 0.06Q. What are the profit-maximizing price and quantity of admission if the zoo charges one admission price for all? Calculate the total revenue in this case.
C) Would you recommend charging one admission price for all or different prices for adult and children/senior citizens? Why do you make that recommendation?
Suppose the local zoo hires you to assist them in setting admission prices. The zoo's managers recognize that there are two distinct groups of consumers for zoo admission: adults (A) and children/senior citizens (CS). The demand and marginal revenue functions for the two groups are as follows:
PA = 9.6 - 0.08QA MRA = 9.6 - 0.16QA
PCS = 4 - 0.05QCS MRCS = 4 - 0.10QCS
Suppose the zoo is large enough so that crowding is not a problem at the zoo. The managers, therefore, consider the marginal cost to be zero. Answer the following questions:
A) If the zoo decides to price discriminate, what are the profit-maximizing price and quantity in each sub-market? Calculate the total revenue for each sub-market.
B) If the zoo decides not to price discriminate, it faces a combined demand and marginal revenue function of P = 6.15 - 0.03Q and MR = 6.15 - 0.06Q. What are the profit-maximizing price and quantity of admission if the zoo charges one admission price for all? Calculate the total revenue in this case.
C) Would you recommend charging one admission price for all or different prices for adult and children/senior citizens? Why do you make that recommendation?
