Problem Set 6_ Special Pricing.docx - 1) An amusement park,...

1) An amusement park, whose customer set is made up of two markets, adult and children, has
developed demand schedules as follows:
Price ($) Quantity,
Adults
Total
Revenue
Adults
Total
Cost
Adults
Profit Quantity,
Children
Total
Revenue
Child
Total
Cost
Child
Profit
5 15 75 75 0 20 100 100 0
6 14 84 70 14 18 108 90 18
7 13 91 65 26 16 112 80 32
8 12 96 60 36 14 112 70 42
9 11 99 55 44 12 108 60 48
10 10 100 50 50 10 100 50 50
11 9 99 45 54 8 88 40 48
12 8 96 40 56 6 72 30 42
13 7 91 35 56 4 52 20 32
14 6 84 30 54 2 28 10 18
The marginal operating cost of each unit of quantity is $5. (Hint: Because marginal cost
is a constant, so is average variable cost. Ignore fixed cost.) The owners of the
amusement park want to maximize profits.
a) Calculate the price, quantity, and profit for each segment if the amusement park
charges a different price in each market. (Hint: calculate profit at each price in the
adult market, then in the child market, and choose profit maximizing in each. Using a
spreadsheet would make this task manageable.)