Question

17. Suppose that 1,000 people are interested in attending Elvis Land. Once a person arrives at Elvis Land, his or her inverse demand for rides is given by p(y) = 100 – 3y, where p is the price per ride. The cost function for rides in Elvis Land is c(y) = 20y + 0.5y2. Elvis Land charges a profit-maximizing two-part tariff, with one price for admission to Elvis Land and another price per ride for those who get in. What is the price for admission to Elvis Land?

- Answer: 40

18. Suppose that 1,000 people are interested in attending Elvis Land. Once a person arrives at Elvis Land, his or her inverse demand for rides is given by p(y) = 100 – 3y, where p is the price per ride. The cost function for rides in Elvis Land is c(y) = 20y + 0.5y2. Elvis Land charges a profit-maximizing two-part tariff, with one price for admission to Elvis Land and another price per ride for those who get in. What is the price per ride for those who get in?

- Answer: 600

19. Suppose that 1,000 people are interested in attending Elvis Land. Once a person arrives at Elvis Land, his or her inverse demand for rides is given by p(y) = 100 – 3y, where p is the price per ride. The cost function for rides in Elvis Land is c(y) = 20y + 0.5y2. Elvis Land charges a profit-maximizing two-part tariff, with one price for admission to Elvis Land and another price per ride for those who get in. What is the total monopolistic profit?

Answer 1

There are 1000 consumers for ride inelvis land.

Since there is one type of consumer and all consumers have the same demand curve, then monopolist can capture all the consumer surplus by setting price equal to marginal cost and setting the fixed fee equal to the consumer surplus for an individual consumer.

number of rides each consumer will demand can be determined from the point where price is equal to marginal cost

Since there are 1000 consumers and each consumer takes 20 rides. Therefore, in total 20,000 rides will be taken by the customers

Question 17) price for admission to elvis land per customer is 600

Question 18) price per ride for each customer is 40

Question 19) monopolist profits are 800,000