Suppose That 3,500 People Are Interested in Attending ElvisLand

question 7

Multiple Choice

Suppose that 3,500 people are interested in attending ElvisLand. Once a person arrives at ElvisLand, his or her demand for rides is given by x = max{ 7 - p, 0} , where p is the price per ride. There is a constant marginal cost of $3 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) $3 per ride and $7 for admission
• B) $0 per ride and $4 for admission
• C) $0 per ride and $11 for admission
• D) $3 per ride and $8 for admission
• E) $7 per ride and $7 for admission

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Definitions:

Captive Finance Company

A subsidiary whose primary purpose is to provide financing to customers buying the parent company's product, facilitating purchases and increasing sales.

Direct Leasing

A lease arrangement where the lessor purchases the asset and rents it directly to the lessee without involving intermediaries.

Lease Versus Buy

The decision-making process regarding whether to finance an asset through leasing or purchasing it outright.

Operating Lease

A leasing agreement allowing the use of an asset without ownership, typically with shorter terms than a finance lease.