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You run a go-kart track facility in a small town. There are 1000 potential customers in this town, and each one of them has an
You run a go-kart track facility in a small town. There are 1000 potential customers in this town, and each one of them has an individual annual demand curve for your go-kart rides that can be characterized by the equation Q=30-2P. Your fixed annual costs of operation are $50,000 per year, and your marginal cost, for each ride that someone takes is $4. (a) Suppose you set a single per-ride price with the goal of maximizing your profits. . You should price each ride at $ . Each customer will go on rides per year. . Your total annual profits will be $ (Remember, there are 1000 customers total. Don't forget to include fixed costs in your calculation!) (b) Suppose that rather than setting just a single per-ride price, you create a Karting Klub. In order to use your facility, customers must first join your club and pay an annual membership fee. You can then also charge them a fee for each ride they take. Under this pricing scheme, what should you do to maximize your profits? . You should set the annual individual membership fee to $ . You should price each ride at $ . Each customer will go on rides per year. . Your total annual profits will be $ (Remember, there are 1000 customers total. Don't forget to include fixed costs in your calculation!)
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