Colonel Tom Barker is about to open his newest amusement park, Elvis World. Elvis World features a number of exciting attractions: you can ride the rapids in the Blue Suede Chutes, climb the Jailhouse Rock and eat dinner in the Heartburn Hotel. Colonel Tom figures that Elvis World will attract 1,000 people per day, and each person will take x = 50 − 50p rides, where p is the price of a ride. Everyone who visits Elvis World is pretty much the same and negative rides are not allowed. The marginal cost of a ride is essentially zero.
(a) What is each person’s inverse demand function for rides? ___________.
(b) If Colonel Tom sets the price to maximize profit, how many rides will be taken per day by a typical visitor? ___________.
(c) What will the price of a ride be? ___________.
(d) What will Colonel Tom’s profits be per person? ___________
(e) What is the Pareto efficient price of a ride? ___________.
(f) If Colonel Tom charged the Pareto efficient price for a ride, how many rides would be purchased? ___________.
(g) How much consumers’ surplus would be generated at this price and quantity? ___________.
(h) If Colonel Tom decided to use a two-part tariff, he would set an admission fee of ___________ and charge a price per ride of ___________.