Suppose That 2,000 People Are Interested in Attending ElvisLand

question 18

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:

Demand Curve

A graphical representation that shows the relationship between the price of a product and the quantity of the product that consumers are willing and able to purchase at various prices.

Sensitive

Pertaining to something that requires careful handling due to its potential to cause a reaction or damage under certain conditions.

Ten-Year Period

A duration of ten years used as a measurement of time for planning, analysis, or investment purposes.

Price Elasticity

A measure of how the quantity demanded of a good is affected by a change in its price.