Disney land discovers that they have two groups of customers with two different
ID: 1098258 • Letter: D
Question
Disney land discovers that they have two groups of customers with two different demand curves. Locals have demand P= 20-0.1Q and foreigners have demand P=100-0.2Q. What is the profit maximizing set of prices? (The marginal cost of visitors is zero.)
If Marginal Cost is zero then in both cases we should set Price to zero and solve for quantity.
Therefore:
For Locals: 0 = 20 - .1Q For Foreigners: 0 = 100 - .2Q
20 = .1Q 100 = .2Q
200 = Q Q = 500
(If this is correct i also dont know where to go from here.)
Explanation / Answer
for profit maximization, MR=MC=0
For locals
Revenue = PQ = 20Q - .1Q^2
MR = 20-0.2Q
MC = 0
Q =100
P = 20-.1*100 = 10
For foreigners
Revenue = PQ = 100Q - .2Q^2
MR = 100-0.4Q
MC = 0
Q = 250
P =100-.2*250 = 50