You are the manager of a new amusement park that has monopoly power over the service it offers: roller coaster rides. You have figured that the park will attract 1,000 people per day, and each person will take x = 50 50p rides, where p is the price of a ride.

The marginal cost of a ride is essentially zero.

(6 points) (a) If admission to the park were free and you had to choose the profit maximizing price of a ride p, which value would you set?

(6 points) (b) Suppose now that you can use a two-part tariff, i.e., you can set a price for admission to the park, and another one for each roller coaster ride. Which admission fee and price of a ride would you choose? Show your work: to receive full credit you should show how you compute the optimal prices.