Monopoly Rinks is the only ice skating facility in Mapleville. The next closest

Question

Monopoly Rinks is the only ice skating facility in Mapleville. The next closest rink is about 100 miles away. It has determined that its demand curve is
Q = 123 - 0.5P - 0.25 Pc + .01 Y
where Q is the quantity of seasonal passes sold, P is the price for seasonal pass, Pc is the average price for concession items, and Y is average per capital income in Mapleville.
The local economists estimate that Y is equal to $12,000 and Monopoly has set Pc at $10. If Monopoly's MC of serving another customer is equal to $1, what is the profit maximizing price for seasonal passes?

Explanation / Answer

Given demand curve of the ice skating facility. Profit maximising price is obtained by equalling marginal revenue to marginal cost. Therefore equating the revenue and marginal cost. Price decreases by 2 when quantity increases by 1 unit . So marginal Revenue is (Q+1)*P-Q*(P-2)= which when simplified gives M.R= 2P-248-0.5Pc-0.02Y which is equal to M.C=$1 we get P=247$ I am 100% sure abt the answer Hope this helps :)

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