The Snow City Ski Resort caters to both out-of-town skiers and local skiers. The

Question

The Snow City Ski Resort caters to both out-of-town skiers and local skiers. The demand for ski tickets of out-of-town skiers is given by Qo = 600 - 10 Po, while the demand for ski tickets of local skiers is given by Ql = 600 - 20 Pl . The marginal cost of servicing a skier of either type is $10. If Snow City Ski Resort (third-degree) price discriminates then the profit maximizing prices (for a ski ticket) are Answer Po = $35 and Pl = $20 Po = $30 and Pl = $25 Po = $15 and Pl = $28 None of the above

Explanation / Answer

To answer this question the student would solve for the optimal quantity in each market by setting marginal revenue in the market equal to marginal cost. Prices are found by substituting these quantities into the relevant demand curves. Profits are found by subtracting the total costs ($10

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