An amusement park, whose customer set is made up of, two markets. adult, and chi

Question

An amusement park, whose customer set is made up of, two markets. adult, and children, has developed demand schedules as follows. The marginal operating cost of each unit of quantity is $5. The owners of the amusement park want to maximize profits. Calculate the price, quantity, and profit for each segment if the amusement park charges a different price in each market. Adult market price (in dollars): [a] Adult market quantity: [b] Adult market profit (in dollars), [c] Child market price (in dollars): [d] Child market quantity: [e] Child market profit (in dollars), [f] Total profit (adult + child, in dollars): [g] Calculate the price, quanhty. arid prof,, it the amusement part, charges the same price in the two markets combined Market price (in dollars): [a] Quantity (child + adult at this price): [b] Profit: [c] Is profit higher, lower, or the same when the market is split with different prices for adults and for children? Higher profit with split pricing Lower profit with split pricing Same profit with split pricing Cannot determine with the information available

Explanation / Answer

Q.11. If amusemnet park chrges differnt markets differently:

Adult Market:

From the above table it is clear that MR meets MC at 12 units. Hence $8 will be charged in this market

Thus adult market price = $8 and quantity = 12.

Profit = TR - TC = 12*8 - 12*5 = 96-60 = $36

Children market:

Child market quantity = 16, price = $7

Profit = TR - TC = 16*7 - 16*5 = 112 - 80 = $32.

Total profit from both markets = 36+32 = $68

Q.12. If the park charges same price then lets sum up the demand of two markets as follows:

MR meets MC at 26 units with $8 price.

Market price = $8 market quantity = 26; Profit = TR - TC = 26*8 - 26*5 = 208 - 130 = $78

Q13. When the market is split profit is lower and when market is combined profit is higher.

Price Q TR MR MC 5 15 75 0 5 6 14 84 9 5 7 13 91 7 5 8 12 96 5 5 9 11 99 3 5 10 10 100 1 5 11 9 99 -1 5 12 8 96 -3 5 13 7 91 -5 5 14 6 84 -7 5

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