The demand equation for the resort as a whole:
Q = 1,000 -30P (P = 33.33 – 0.033Q with MR = 33.33 – 0.067Q)
The demand equation for Out of Town Skiers:
Qo = 500 – 10P (P = 50 – 0.1Q with MR = 50 – 0.2Q)
The demand equation for Local Skiers:
Ql = 500 – 20P (P = 25 – 0.05Q with MR = 25 – 0.1Q)
And MC = $10 for all the skiers.
a.Suppose that White Mountain Ski Resort charges one price for all skiers, local as well as out of town skiers, what would be that one price? Please use two digits after dollar, say $10.52 in your answer.
b.How many local and out of town skiers would White Mountain Ski Resort be able to attract at that one price for all? Please round up you number of customers in your answer. For instance, if your answer were 105.60, round it up to 106 customers and if 83.30, round it down to 83 customers. Note: Q’s from (a) and (b) will be slightly different.
c.Assuming that there is no fixed cost involved for simplicity, what would be total profit from that one price strategy above?
d.If the company decided to charge two different prices for local and out of town skiers, what would be the respective prices, one for local customer and the other for out of town customer?
e.How many local and out of town customers would White Mountain Ski Resort be able to attract from this two tier pricing strategy? Compare the composition of local and out of town skiers in (e) to your answer in (b) and comment on the reason for the difference.
f.Compare potential profits from these two pricing strategies, one price for all and two different prices for local and out of town customers and discuss why there is a difference in profit between the two pricing strategies, one price v. two different prices.
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