The residents of the town Ectenia all love economics, and the mayor proposes bui

Question

The residents of the town Ectenia all love economics, and the mayor proposes building an economics museum. The museum has a fixed cost $2,400,000 and no variable costs. There are 100,000 town residents, and each has the same demand for museum visits: Qd =P, where p is the price of admission. c) The mayor's antitax opponent says the museum should finance itself by charging an admission fee. What is the lowest price the museum can charge without incurring losses? (Hint: Find the number of visits and museum profits for prices of $2, $3,$4, $5)

Explanation / Answer

Qd=P

So, 2,400,000/100,000= 24 =Qd=P

For price $2 the number of visits will be 24/2= 12

For price $3 number of visits will be 24/3= 8

For price $4 number of visits will be 24/4= 6

and for price $5 number of visits will be 24/5= 4.8.

So, the museum can charge $2 without incurring losses as in this price the number of visits will be higher.

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