What price will tourists be charged for a daily pass?$ Questión 10 óf 18Holiday Beach is a world-renowned beach operated by Holiday Town. The beach is remotely located and the only parking areafor the beach is controlled by the town government. The graphs depict the marginal revenue (MR) and demand (D) for dailyparking passes for tourists and residents.TouristsResidentsPrice per dayPrice per day$20$20718181614141212D10 -108866MR44MR212346.789.10123478910Quantity of passesQuantity ofpassesSuppose Holiday Town issues registration plates to its residents to make it easy to determine which cars belong to residents andwhich cars belong to tourists. Assume the marginal cost of providing a daily parking pass is a constant $4 and Holiday Townwishes to price discriminate.What price will town residents be charged for a daily pass?$%24

Price discrimination is the practice of charging different prices for the same good or service for different quantities or in different markets. Holiday Beach town government decided to price discriminate because for tourists the demand for parking area is less elastic while for residents the demand for parking area is more elastic. Since it is only parking area government can sell it a higher price for tourists with relatively inelastic demand and at a lesser price for residents with high elastic demand Profits are maximised by selling the optimum quantity of output where MC = MR. Price for resident: According to the given graph, for marginal cost (MC) is $4, optimum quantity is 3 passes at MC = MR. For this optimum quantity, at the demand curve the equilibrium price is $6 per day. Therefore the price the town residents will be changed for a daily pass is $6. Price for tourists: For marginal cost (MC) equals $4, optimum quantity is 2 passes at MC = MR. For this optimum quantity, the demand curve determines the equilibrium price at $12 per day. Therefore the price the tourists will be changed for a daily pass is $12.

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Economics

Tourists Residents Price per day Price per day $201 $20 18- 18 - 16- 16- 14 - 14 - 12- 12- D 10- 10 - 8- 8 6- MR 4. 4 - D MR 2- 2 - 1 2 4 6 7 9 10 1 2 3 7 8 9 10 Quantity of passes Quantity of passes Suppose Holiday Town issues registration plates to its residents to make it easy to determine which cars belong to residents and which cars belong to tourists. Assume the marginal cost of providing a daily parking pass is a constant $4 and Holiday Town wishes to price discriminate. What price will town residents be charged for a daily pass? $

Tourists Residents Price per day Price per day $201 $20 18- 18 - 16- 16- 14 - 14 - 12- 12- D 10- 10 - 8- 8 6- MR 4. 4 - D MR 2- 2 - 1 2 4 6 7 9 10 1 2 3 7 8 9 10 Quantity of passes Quantity of passes Suppose Holiday Town issues registration plates to its residents to make it easy to determine which cars belong to residents and which cars belong to tourists. Assume the marginal cost of providing a daily parking pass is a constant $4 and Holiday Town wishes to price discriminate. What price will town residents be charged for a daily pass? $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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