Question

A local zoo observes the following demand schedule. Ticket Price Tickets Sold \$50 300 \$40 400...

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

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

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