Price charged to local versus out of town visitors

Reference no: EM13117380

Mayo Destination Water Park Center offers family fun year-round in the Northstar state to locals and out-of-state visitors to the nearby Mayo Center. The demand for day-passes to the water park for each market segment is independent of the other market segment. The marginal cost of providing service to each visitor is $5 per day. Suppose the daily demand curves for the two market segments are:

Locals:

1124_How many day-passes will be sold per day to locals.png

Out of town:

1506_How many day-passes will be sold per day to locals1.png

a. If Mayo Destination Water Park Center charges one price to locals, what is the profit maximizing price for locals? How many day-passes will be sold per day to locals?

b. If Mayo Destination Water Park Center charges one price to out-of-towners, what is the profit maximizing price for out-of-town guests? How many day-passes will be sold per day to out-of-town guests?

c. Explain why the relationship between the prices charged to locals versus the prices charged to out of town visitors? Why does this happen?

Reference no: EM13117380

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