Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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!)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started