6- "La Ronde" is a monopoly in the amusement park industry for the Montreal region. Its owner ordered a market research

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6 La Ronde Is A Monopoly In The Amusement Park Industry For The Montreal Region Its Owner Ordered A Market Research 1 (43 KiB) Viewed 27 times

6- "La Ronde" is a monopoly in the amusement park industry for the Montreal region. Its owner ordered a market research to estimate the potential demand for the amusement park, so as to set prices for the 2014 season. The market research identified two distinct segments of the population: • The student population, with an estimated demand of P-35- • The general public (ie, everyone except the student population), with an estimated demand given by P=20-0.50 where is the ticket price in dollars, and Q the number of admissions. The marginal cost of a La Ronde visitor is $5, regardless of which segment the visitot belongs to. Assume there are no fixed costs already amortized). a) Suppose La Ronde decides to charge a single price to everyone. What price would it charge in order to maximize its profits? • How many admission tickets would be sold to each consumer segment • What would be the total number of admissions? • What would be La Ronde's profits under this single-price policy? b) Compute the price elasticity of demand for each consumer segment under the single-price policy established in a) c) Given your answer to question b), can you predict which consumer seg. ment-students or the general public - would be charged a cheaper admission price if La Ronde decided to engage in price discrimination to maximize profits? Explain. d) What is the logic behind charging different prices to the two consumer segments? e) Compute the prices La Ronde should charge each consumer segment in order to maximize its profits. • How many tickets would be sold to each consumer segment? • What would be the total number of admissions? • What would be ta Ronde's profits? • What is your conclusion concerning this pricing policy? ) Do you think the pricing policy determined in e) can be effective in prac- tice? Why or why not? (Hint: As a student, what would be your behavior when purchasing a ticket)