4. Suppose that an amusement park is a local monopoly. It has daily fixed costs of $30,000 and marginal cost ofzero. There are 1000 identical people who wish to visit the park each day. The preferences of a typical parkvisitor are defined over the number of rides x he "consumes" and the number of dollars m left in his pocket atthe end of the day. These preferences are represented by the utility function U(x,m) = 10 x -x14 + m. Supposethat each visitor comes to the park with l=200 dollars in his pocket.a. If p is the price of rides, what is a typical park visitor's budget constraint over bundles (x,m)?b. What is a typical park visitor's demand function for rides, x*(p)? Sketch this function in a graph, being sureto label the vertical and horizontal intercepts. What is the market demand for rides?c. Suppose the amusement park operates as a "simple" monopolist (i.e., charges a linear price for rides).What price, p*, will it set? (Depict p* in your graph.) How much profit, n*, will it earn? How muchconsumer surplus, CS*, will each consumer enjoy? How much per capita dead-weight loss is generated,DWL*?d. Suppose the monopolist practices second-degree price discrimination by charging each visitor an entry fee,4, and a price per ride of p. What price for rides, p**, will the park set? What entry fee, **, will it set?How much profit, a*, will it earn? How much consumer surplus, CS**, will each consumer enjoy? Howmuch per capita dead-weight loss will be generated, DWL**?

Utility function :U (x , m ) = 10x - x2/4 + m Income of visitors = 200 Price of ride (x) = p Price…

4. Suppose that an amusement park is a local monopoly. It has daily fixed costs of $30,000 and marginal cost of zero. There are 1000 identical people who wish to visit the park each day. The preferences of a typical park visitor are defined over the number of rides x he "consumes" and the number of dollars m left in his pocket at the end of the day. These preferences are represented by the utility function U(x,m) = 10 x-x14 + m. Suppose that each visitor comes to the park with I=200 dollars in his pocket. If p is the price of rides, what is a typical park visitor's budget constraint over bundles (x,m)? b. What is a typical park visitor's demand function for rides, r*(p)? Sketch this function in a graph, being sur to label the vertical and horizontal intercepts. What is the market demand for rides? c. Suppose the amusement park operates as a "simple" monopolist (i.e., charges a linear price for rides). What price, p*, will it set? (Depict p* in your graph.) How much profit, n*, will it earn? How much consumer surplus, CS*, will each consumer enjoy? How much per capita dead-weight loss is generated, DWL*? d. Suppose the monopolist practices second-degree price discrimination by charging each visitor an entry fee ill it

4. Suppose that an amusement park is a local monopoly. It has daily fixed costs of $30,000 and marginal cost of zero. There are 1000 identical people who wish to visit the park each day. The preferences of a typical park visitor are defined over the number of rides x he "consumes" and the number of dollars m left in his pocket at the end of the day. These preferences are represented by the utility function U(x,m) = 10 x-x14 + m. Suppose that each visitor comes to the park with I=200 dollars in his pocket. If p is the price of rides, what is a typical park visitor's budget constraint over bundles (x,m)? b. What is a typical park visitor's demand function for rides, r(p)? Sketch this function in a graph, being sur to label the vertical and horizontal intercepts. What is the market demand for rides? c. Suppose the amusement park operates as a "simple" monopolist (i.e., charges a linear price for rides). What price, p, will it set? (Depict p* in your graph.) How much profit, n, will it earn? How much consumer surplus, CS, will each consumer enjoy? How much per capita dead-weight loss is generated, DWL*? d. Suppose the monopolist practices second-degree price discrimination by charging each visitor an entry fee ill it

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please do not give solution in image formate thanku. The demand for airline travel is quite sensitive to price. Typically, there is an inverse relationship to between demand and price; when price decreases, demand increases and vice versa. One major airline has found that when the price (p) for a round trip between Chicago and Los Angeles is $600, the demand (D) is 500 passengers per day. When the price is reduced to $400, demand is 1,200 passengers per day. Use a data table to estimate the price that maximizes total revenue.
The individual demand for rides at an amusement park in Ellentown, Donkey Park, is represented by the demand function q = 8 − p, where q is the number of rides and p is the price. Donkey Park incurs a constant marginal and average cost of $2 per ride.(a) Suppose Donkey Park employs block pricing with two blocks. Find the profitmaximizing blocks and the corresponding block prices.(b) Suppose Donkey Park employs two-part pricing. Find the profit-maximizing entrance fee and charge per ride.(c) Without calculating the deadweight loss, argue which pricing method, the one in (a) or the one in (b), results in a lower deadweight loss.
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