Homework Help is Here – Start Your Trial Now!
Business
Economics
7. Understanding two-part price discrimination Consider the market for rides at an amusement park. Because it is the only amusement park around, it acts as a monopolist with market power and uses a linear pricing strategy by selling rides to all entrants for the same price. All consumers have roughly the same demand (d) as depicted on the following graph, which also shows the marginal revenue (mr) curve. The marginal cost (MC) to the amusement park of an additional ride is constant at $1.60. For simplicity, assume that fixed costs are zero so marginal costs equal average costs (AC). On the following graph, use the grey point (star symbol) to indicate the monopoly outcome under linear pricing strategy. Then, use the purple rectangle (diamond symbols) to shade the area representing profit per consumer at the profit-maximizing price and quantity. Note: Select and drag shaded regions from the palette to the graph. To resize the shaded regions, select one of the points and move to the desired position. PRICE (Dollars per ride) 1.2 :ཚ ོ སྦྱ ༷ ོ སྣུ སྐྱུ⌘ཌཱུ 1.6 2.0 2.4 2.8 3.2 0.8 0.4 2 4 mr Monopoly Outcome Profit MC=AC Consumer Surplus 14 16 18 20 6 8 10 12 QUANTITY (Number of rides) ? Now suppose the park decides to switch to a two-part pricing scheme by charging an admission fee but also lowering the cost of an individual ride. In this case, the profit-maximizing per-ride charge would be $ Use the green triangle to shade the region representing consumer surplus given this pricing plan, before accounting for the admission fee. To maximize profits, the admission fee should be set equal to $ per consumer.

7. Understanding two-part price discrimination Consider the market for rides at an amusement park. Because it is the only amusement park around, it acts as a monopolist with market power and uses a linear pricing strategy by selling rides to all entrants for the same price. All consumers have roughly the same demand (d) as depicted on the following graph, which also shows the marginal revenue (mr) curve. The marginal cost (MC) to the amusement park of an additional ride is constant at $1.60. For simplicity, assume that fixed costs are zero so marginal costs equal average costs (AC). On the following graph, use the grey point (star symbol) to indicate the monopoly outcome under linear pricing strategy. Then, use the purple rectangle (diamond symbols) to shade the area representing profit per consumer at the profit-maximizing price and quantity. Note: Select and drag shaded regions from the palette to the graph. To resize the shaded regions, select one of the points and move to the desired position. PRICE (Dollars per ride) 1.2 :ཚ ོ སྦྱ ༷ ོ སྣུ སྐྱུ⌘ཌཱུ 1.6 2.0 2.4 2.8 3.2 0.8 0.4 2 4 mr Monopoly Outcome Profit MC=AC Consumer Surplus 14 16 18 20 6 8 10 12 QUANTITY (Number of rides) ? Now suppose the park decides to switch to a two-part pricing scheme by charging an admission fee but also lowering the cost of an individual ride. In this case, the profit-maximizing per-ride charge would be $ Use the green triangle to shade the region representing consumer surplus given this pricing plan, before accounting for the admission fee. To maximize profits, the admission fee should be set equal to $ per consumer.

Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter16: Monopolistic Competition
Section: Chapter Questions
Problem 8PA
See similar textbooks
icon
Related questions
Question

Note:-

  • Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
  • Answer completely.
  • You will get up vote for sure.
7. Understanding two-part price discrimination Consider the market for rides at an amusement park. Because it is the only amusement park around, it acts as a monopolist with market power and uses a linear pricing strategy by selling rides to all entrants for the same price. All consumers have roughly the same demand (d) as depicted on the following graph, which also shows the marginal revenue (mr) curve. The marginal cost (MC) to the amusement park of an additional ride is constant at $1.60. For simplicity, assume that fixed costs are zero so marginal costs equal average costs (AC). On the following graph, use the grey point (star symbol) to indicate the monopoly outcome under linear pricing strategy. Then, use the purple rectangle (diamond symbols) to shade the area representing profit per consumer at the profit-maximizing price and quantity. Note: Select and drag shaded regions from the palette to the graph. To resize the shaded regions, select one of the points and move to the desired position. PRICE (Dollars per ride) 4.0 3.6 3.2 2.8 2.4 2.0 1.6 1.2 0.8 0.4 Monopoly Outcome Profit MC=AC Consumer Surplus mr d 0 0 2 4 6 8 10 12 14 16 18 20 QUANTITY (Number of rides) (?) Now suppose the park decides to switch to a two-part pricing scheme by charging an admission fee but also lowering the cost of an individual ride. In this case, the profit-maximizing per-ride charge would be $ Use the green triangle to shade the region representing consumer surplus given this pricing plan, before accounting for the admission fee. To maximize profits, the admission fee should be set equal to $ per consumer.
Transcribed Image Text:7. Understanding two-part price discrimination Consider the market for rides at an amusement park. Because it is the only amusement park around, it acts as a monopolist with market power and uses a linear pricing strategy by selling rides to all entrants for the same price. All consumers have roughly the same demand (d) as depicted on the following graph, which also shows the marginal revenue (mr) curve. The marginal cost (MC) to the amusement park of an additional ride is constant at $1.60. For simplicity, assume that fixed costs are zero so marginal costs equal average costs (AC). On the following graph, use the grey point (star symbol) to indicate the monopoly outcome under linear pricing strategy. Then, use the purple rectangle (diamond symbols) to shade the area representing profit per consumer at the profit-maximizing price and quantity. Note: Select and drag shaded regions from the palette to the graph. To resize the shaded regions, select one of the points and move to the desired position. PRICE (Dollars per ride) 4.0 3.6 3.2 2.8 2.4 2.0 1.6 1.2 0.8 0.4 Monopoly Outcome Profit MC=AC Consumer Surplus mr d 0 0 2 4 6 8 10 12 14 16 18 20 QUANTITY (Number of rides) (?) Now suppose the park decides to switch to a two-part pricing scheme by charging an admission fee but also lowering the cost of an individual ride. In this case, the profit-maximizing per-ride charge would be $ Use the green triangle to shade the region representing consumer surplus given this pricing plan, before accounting for the admission fee. To maximize profits, the admission fee should be set equal to $ per consumer.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 3 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Price Discrimination
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
Economics
ISBN:
9781305971493
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou…
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
ECON MICRO
ECON MICRO
Economics
ISBN:
9781337000536
Author:
William A. McEachern
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS