You are the manager of a new amusement park that has monopoly power over the service it offers: roller coaster rides. You have figured that the park will attract 1,000 people per day, and each person will take x = 50 − 50p rides, where p is the price of a ride. The marginal cost of a ride is essentially zero.

i. If admission to the park were free and you had to choose the profit maximizing price of a ride, p, what would it be? (5 marks)

ii. Suppose now that you can use a two-part tariff, i.e., you can set a price for admission to the park, and another one for each roller coaster ride. Which admission fee and price of a ride would you choose? (5 marks)

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