question archive A fan of classical music would like to attend the symphony multiple times in a given month, but her willingness to pay for each subsequent performance decreases with the number of performances she has already attended
A fan of classical music would like to attend the symphony multiple times in a given month, but her willingness to pay for each subsequent performance decreases with the number of performances she has already attended
Subject:EconomicsPrice:2.87 Bought7
A fan of classical music would like to attend the symphony multiple times in a given month, but her willingness to pay for each subsequent performance decreases with the number of performances she has already attended. In particular, she is willing to pay $150 for the first performance, $100 for the second, and $60 for the third. The cost of each ticket to the symphony amounts to roughly $40. Which of the two-part tariff schemes listed below yields the highest profit to the symphony from the given fan?
1) Charge $100 monthly membership fee, and $60 per ticket
2) Charge a $190 monthly membership fee, and $40 per ticket
3) Charge only a $300 monthly membership
4) Charge no monthly membership, and $100 per ticket
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Answer:
1) Total Cost = 40 X 3 = $ 120
Total Revenue = $ 100 + $ 60 X 3 times = $ 280
Profit = 280 - 120 = $ 160
2) Total Cost = 40 X 3 = $ 120
Total revenue from this type of tariff = $ 190 + $ 40 X 3 times = $ 190 + $ 120 = $ 310
Profit = $ 310 - 120 = $ 190
3) Total Cost = 40 X 3 = $ 120
Total Revenue = $ 300
Profit = $ 300 - $ 120 = $ 180
4) Total Cost = 40 X 3 = $ 120
Total Revenue = $ 100 X 3 = $ 300
Profit = $ 300 - $ 120 = $ 180
2) Charge a $190 monthly membership fee, and $40 per ticket is the tariff scheme which yields the highest profit.
