Marginal cost of operating the park

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Reference no: EM131284398

River Park has a low demand D1 during work days, but on Saturday and Sunday demand increases to D2. The demand and marginal revenue functions are:

D1 : P1 = 2-0.001Q1

MR1 = 2 - 0.002Q1

D2 : P2 = 20-0.01Q2

MR2 = 20 - 0.02Q2

where Q = number of visitors entering the park each day. The marginal cost of operating the park is the same on weekdays and weekends:

MC = 1 + 0.004Q

  1. In order to control crowds, the park's management uses peak-load pricing. This scheme controls crowds and makes sure the park is self-supporting. Calculate the appropriate prices to charge, and determine the number of cars entering the park, Q1 and Q2.
  2. Explain how switching from a uniform pricing scheme to a peak load pricing scheme affects the market. Be as precise as you can about the differences between uniform and peak-load pricing.

Reference no: EM131284398

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