The Local Zoo Has Hired You to Assist Them in Setting

question 55

Essay

The local zoo has hired you to assist them in setting admission prices. The zoo's managers recognize that there are two distinct demand curves for zoo admission. One demand curve applies to those ages 12 to 64, while the other is for children and senior citizens. The two demand and marginal revenue curves are:
PA = 9.6 - 0.08QA
MRA = 9.6 - 0.16QA
PCS = 4 - 0.05QCS
MRCS = 4 - 0.10QCS
where PA = adult price, PCS = children's/senior citizens' price, QA = daily quantity of adults, and QCS = daily quantity of children and senior citizens. Crowding is not a problem at the zoo, so that the managers consider marginal cost to be zero.
a. If the zoo decides to price discriminate, what are the profit maximizing price and quantity in each market? Calculate total revenue in each sub-market.
b. What is the elasticity of demand at the quantities calculated in (a) for each market. Are these elasticities consistent with your understanding of profit maximization and the relationship between marginal revenue and elasticity?

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Definitions:

Weight or Height Requirements

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Employment Equity Requirements

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