20. Two-part tariff." A two-part tariff is another price-discrimination method where the producer of argood is able to capture the entire consumer surplus. An example of this might be an amusement park that charges a fee for entry (the tariff), and then charges the customer for each ride (by buying tickets). Let's investigate how a firm sets the optimal two-part tariff by assuming that we have 100 consumers each, with demand for rides of p=9-q, and the costs of running the amusement park are C(q)=100+q. (a) Uniform pricing. If the firm acts as a monopoly, setting a single price, what is its profit- maximizing price, quantity of rides (per person and aggregate), and profit? (b) Marginal cost pricing. If the firm sets its price per ride equal to marginal cost, what is the number of rides it will sell (per person and aggregate) and consumer surplus? (c) Two-part tariff. If the amusement park uses a two-part tariff, setting its entrance fee equal to consumer surplus while charging a price per ride equal to its marginal cost, what is its total profit?

20. Two-part tariff." A two-part tariff is another price-discrimination method where the producer of argood is able to capture the entire consumer surplus. An example of this might be an amusement park that charges a fee for entry (the tariff), and then charges the customer for each ride (by buying tickets). Let's investigate how a firm sets the optimal two-part tariff by assuming that we have 100 consumers each, with demand for rides of p=9-q, and the costs of running the amusement park are C(q)=100+q. (a) Uniform pricing. If the firm acts as a monopoly, setting a single price, what is its profit- maximizing price, quantity of rides (per person and aggregate), and profit? (b) Marginal cost pricing. If the firm sets its price per ride equal to marginal cost, what is the number of rides it will sell (per person and aggregate) and consumer surplus? (c) Two-part tariff. If the amusement park uses a two-part tariff, setting its entrance fee equal to consumer surplus while charging a price per ride equal to its marginal cost, what is its total profit?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

B
20. Two-part tariff. A two-part tariff is another price-discrimination method where the producer of
argood is able to capture the entire consumer surplus. An example of this might be an amusement
park that charges a fee for entry (the tariff), and then charges the customer for each ride (by buying
tickets). Let's investigate how a firm sets the optimal two-part tariff by assuming that we have 100
consumers each, with demand for rides of p=9-q, and the costs of running the amusement park
are C(q)=100+q.
(a) Uniform pricing. If the firm acts as a monopoly, setting a single price, what is its profit-
maximizing price, quantity of rides (per person and aggregate), and profit?
(b) Marginal cost pricing. If the firm sets its price per ride equal to marginal cost, what is the
number of rides it will sell (per person and aggregate) and consumer surplus?
(c) Two-part tariff. If the amusement park uses a two-part tariff, setting its entrance fee equal to
consumer surplus while charging a price per ride equal to its marginal cost, what is its total
profit?

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PLEASE Use the photo at exercise 14 to solve the problem below With the Firm Y response function Qy=600-1/2Qx and the Firm X response function Qx=600-1/2Qy Imagine that firm X chooses their quantity first, then firm Y observes the quantity of firm X and chooses their own quantity. What quantities will they end up choosing? Is there a first or second-mover advantage here? [You may assume that firm X can only choose quantities that are multiples of 200. This prevents you from having to deal with prices that are not on the schedule. just a little thinking about how equilibrium works in a sequential-move game. Oh, and just give me the quantity for each firm, don't worry about giving me a complete strategy for firm Y.]
Suppose the inverse demand curve for rides in an amusement park is P=70.5-4.7Q, and the marginal cost for offering a ride is 0. Suppose the customers pay an entrance fee and can take as many rides as they want without paying extra money for each ride. What is the optimal entrance fee? Select one: a. 1057.50 b. 2485.12 c. 528.75 d. 1242.56