Suppose That 2,500 People Are Interested in Attending ElvisLand

question 9

Multiple Choice

Suppose that 2,500 people are interested in attending ElvisLand. Once a person arrives at ElvisLand, his or her demand for rides is given by x = max{ 3 - p, 0} , where p is the price per ride. There is a constant marginal cost of $2 for providing a ride at ElvisLand. 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 $3 for admission
• B) $0 per ride and $2.50 for admission
• C) $2 per ride and $.50 for admission
• D) $0 per ride and $1 for admission
• E) $3 per ride and $3 for admission

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