Question

A local zoo observes the following demand schedule.

Ticket Price	Tickets Sold
$50	300
$40	400
$30	500
$20	550
$10	650

The zoo knows that senior citizens all value tickets at $20 or less, and younger visitors all value tickets at $30 or more. Marginal costs are zero. The optimal prices for full-price tickets and senior citizen tickets are:

a. $30 and $10

b. $40 and $10

c. $50 and $20

d. $40 and $20

Answer 1

Since the marginal cost is zero the aim of the local zoo should be maximizing the revenue generated from the sale of tickets. If the price for younger visitors is $50, a total of 300 X 50 or $15,000 is collected, and if the price for senior citizens is $10 a total of 10 x 650 or $6,500 is collected. In this case total revenue is $21,500

If the price for younger visitors is $40, a total of 40 X 400 or $16000 is collected and if the price for senior citizens is $10 total of 10 X 550 or $5500 is collected. In this case total profit is $21,500

Therefore the revenue for the profit is maximized when younger visitors are charged $40 and senior citizens are charged $10. Select option B