Monopoly behavior (Chapter 26 in the book) Problem 1. Suppose you want to open an amusement...

Monopoly behavior (Chapter 26 in the book)

Problem 1. Suppose you want to open an amusement park. Your estimate of the daily attendance is 1000 people. Further, you expect that each person will demand

x(p)= 50-50p rides, where p is the price per ride. All people are the same, and there cannot be negative rides. The marginal cost of a ride is zero.

(a) What is each person’s inverse demand for rides?

(b) How many rides per person will maximize your profits?

(c) What will be the profit-maximizing price per ride?

(d) What will be your profit per person?

(e) What is the Pareto efficient price per ride?

(f) How many rides will be purchased at the Pareto efficient price by a single person?

(g) Ho much consumer surplus per person will be generate at Pareto efficient price and quantity?

(h) If you decide to use a two-part tariff, what would be an admission fee and a price per ride for a single person?

Expert Solution

Rahul Sunny answered 2 years ago

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