An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows: The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits. Quantity Price ($) 5 6 7 8 9 10 11 12 13 14 Adults 15 14 13 12 11 10 9 8 7 6 Children 20 18 16 14 12 10 8 6 4 2 Calculate the price, quantity, and profit if: The amusement park charges a different price in the adult market Please express your answers for Price and Profit in whole dollars (i.e.10.00) Please use whole numbers for Quanitity (i.e. 10, 27, 4) Price Quantity Profit Blank 2 Total Marginal Marginal Total MRRevenue Revenue Cost Cost MC 84 5.00 30.00 54.00 Blank 1 Blank 3 Blank 4 91 7.00 5.00 35.00 2.00 Blank 5 Blank 6 Blank 7 96 5.00 5.00 40.00 0.00 Blank 8 Blank 9 Blank 10 99 3.00 5.00 45.00 -2.00 Blank 11 Blank 12 Blank 13 100 1.00 5.00 50.00 -4.00 Blank 14 Blank 15 Blank 16 99 -1.00 5.00 55.00 -6.00 Blank 17 Blank 18 Blank 19 96 -3.00 5.00 60.00 -8.00 Blank 20 Blank 21 Blank 22 91 -5.00 5.00 Blank 24 Blank 25 84 -7.00 5.00 Blank 27 Blank 28 75 -9.00 5.00 65.00 Blank 23 10.00 70.00 Blank 26 12.00 75.00 Blank 29 14.00 30 points • An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows: The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits. Quantity Price ($) 5 6 7 8 9 10 11 12 13 14 Adults 15 14 13 12 11 10 9 8 7 6 Children 20 18 16 14 12 10 8 6 4 2 Calculate the price, quantity, and profit if: The amusement park charges a different price in the child's market Please express your answers for Price and Profit in whole dollars (i.e.10.00) Please use whole numbers for Quanitity (i.e. 10, 27, 4) Price Quantity Margina Margina l l Cost Revenue 5.00 Total Cost Blank 2 Total Revenu e 52 Blank 1 MRMC Blank 4 Blank 5 72 10.00 5.00 30.00 5.00 Blank 6 Blank 7 Blank 8 88 8.00 5.00 40.00 3.00 Blank 9 20.00 Profit Blank 3 Blank 10 Blank 11 100 6.00 5.00 50.00 1.00 Blank 12 Blank 13 Blank 14 108 4.00 5.00 60.00 -1.00 Blank 15 Blank 16 Blank 17 112 2.00 5.00 70.00 -3.00 Blank 18 Blank 19 Blank 20 112 0.00 5.00 80.00 -5.00 Blank 21 Blank 22 Blank 23 108 -2.00 5.00 90.00 -7.00 Blank 24 Blank 25 Blank 26 100 -4.00 5.00 100.0 0 -9.00 Blank 27 Blank 28 Blank 29 88 -6.00 5.00 110.0 0 11.0 0 Blank 30 30 points • An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows: The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits. Quantity Price ($) 5 6 7 8 9 10 11 12 13 14 Adults 15 14 13 12 11 10 9 8 7 6 Children 20 18 16 14 12 10 8 6 4 2 Calculate the price, quantity, and profit if: The amusement park charges the same price in the two markets combined Please express your answers for Price and Profit in whole dollars (i.e.10.00) Please use whole numbers for Quanitity (i.e. 10, 27, 4) Price Quantity Total Margina Margina Total MR- Profit Revenu l l Cost Cost MC e Revenue Blank 1 Blank 2 143 30.00 55.00 Blank 3 Blank 4 Blank 5 168 8.33 5.00 70.00 3.33 Blank 6 Blank 7 Blank 8 187 6.33 5.00 85.00 1.33 Blank 9 Blank 10 Blank 11 200 4.33 5.00 100.0 0 -0.67 Blank 12 Blank 13 Blank 14 207 2.33 5.00 115.0 0 -2.67 Blank 15 Blank 16 Blank 17 208 0.33 5.00 130.0 0 -4.67 Blank 18 Blank 19 Blank 20 203 -1.67 5.00 145.0 0 -6.67 Blank 21 Blank 22 Blank 23 192 -3.67 5.00 160.0 0 -8.67 Blank 24 Blank 25 Blank 26 175 -5.67 5.00 175.0 0 Blank 28 Blank 29 152 -7.67 5.00 190.0 0 10.6 7 12.6 7 Blank 27 Blank 30 Question 4 Explain the difference in the profit realized under the two situations (the price in each market or in the two markets combined.) Time Warner could offer the History Channel (H) and Showtime (S) individually or as a bundle of both. Suppose the reservation prices of customers 1 and 2 (the highest prices they are willing to pay) are presented in the boxes below. The cost to Time Warner is $1 per customer for licensing fees. Preferences Customer 1 Customer 2 Showtime 9 3 Should Time Warner bundle or sell separately? History Chanel 2 8
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