Suppose That 2,000 People Are Interested in Attending ElvisLand

question 14

Multiple Choice

Suppose that 2,000 people are interested in attending ElvisLand. Once a person arrives at ElvisLand, his or her demand for rides is given by x = max{ 5 - p, 0) , where p is the price per ride. There is a constant marginal cost of $2 for providing a ride at ElvisLand. If ElvisLand charges a profit-maximizing two-part tariff, with one price for admission to ElvisLand and another price per ride for those who get in. How much should it charge per ride and how much for admission?

• A) $2 per ride and $5 for admission
• B) $2 per ride and $4.50 for admission
• C) $0 per ride and $3 for admission
• D) $0 per ride and $6.50 for admission
• E) $5 per ride and $5 for admission

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Definitions:

Manufacturing Processes

A series of steps or operations used to transform raw materials into finished goods through physical, chemical, or mechanical measures.

Plantwide Factory Overhead Rate

A single overhead absorption rate used throughout an entire plant or factory to allocate indirect costs to products uniformly.

Budgeted Factory Overhead

An estimate of the total indirect manufacturing costs that will be incurred to support operations during a specified period.

Plantwide Allocation Base

A single cost driver used throughout an entire plant or facility to allocate overhead costs to different products or cost objects.