An amusement park is consideringchanging its pricing system from a pay- per-ride system to a single entrancefee entitling the entrant to unlimited rides. Assume that the park is not closeto approaching the attendance capacity. The marginal value for rides for thetypical entrant is listed below
QuantityMarginal Value
|
1
2
3
4
5
6
7
|
2.50
2.00
1.50
1.00
0.50
0.10
0.00
|
a) Assuming that the marginal costis zero to provide the rides to those in attendance, what is the bestpay-per-ride price (consider only 50 cent increments)?
b) Suppose instead the park justcharges an entrance fee. What is the profit maximizing entrance fee?
c) Under which system are profitshigher?
d) Under which system is ride usagehigher?
e) If, instead, the marginal cost of providing aride were $0.30, what revision in the pricing scheme, if any, would yousuggest? (extra credit, you may skip this question without penalty)