Question
A traveling circus is evaluating its pricing policy for the next town it will visit. Demand comes from two sources: children (under 12) and adults.
A traveling circus is evaluating its pricing policy for the next town it will visit. Demand comes from two sources: children (under 12) and adults.
The demand from children and its inverse are given by
Qc =60060.Pc PCc=10 1/60.Qc
The demand from adults and its inverse are given by
Qa=80025Pa Pa=32 1/25Qa
The circus management people are experienced at identifying whether a person is under 12 or not, and so are able to charge a different price for children under 12 than for other people.
The marginal cost per adult is zero, but the marginal cost per child under 12 is $1 because each child under 12 gets a free gift.
The circus tent cannot accommodate more than 750 total people (children plus adults).
Q. What are the profit-maximizing quantities and prices?
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