Scenario 15-3
Vincent Operates a Scenic Tour Business in Boston

question 174

Short Answer

Scenario 15-3
Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is:
$$\begin{array} { | l | l | l | } \hline \text { Passen ger Type } & \text { Willingness to Pay } & \text { Demand per day } \\\hline \text { Adults } & \$ 18 & 70 \\\hline \text { Children } & \$ 10 & 25 \\\hline \text { Senior Citizens } & \$ 12 & 55 \\\hline\end{array}$$ Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day.
-Refer to Scenario 15-3. One of Vincent's friends tells him he would be more profitable if he charged a single price of $12. Assuming no changes in consumer demand, what would Vincent's profit be if he charged every customer $12?

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Definitions:

ATC Curve

Short for "Average Total Cost Curve," it represents the average total cost per unit of output produced, showing how cost varies with changes in output levels.

Maximizing Profits

The process of adjusting production and operational processes to achieve the highest possible profit margin.

Minimizing Losses

Strategies or actions taken to reduce the amount of money or resources wasted or not gained in a business operation or investment.

Output

The amount of goods or services produced by a business, industry, or economy.