Big Waves is a large water park. Suppose the individual demand for entrance into Big Waves is Qd = 50 - (2 × P)and each consumer has the same demand. Big Waves has a constant marginal cost of
$5 per consumer. If Big Waves practices two- part pricing and requires a membership fee and then a separate entrance fee, what is the profit- maximizing entrance fee?
A)$50
B)$5
C)$200
D)$10

Question

Quizplus · Accepted Answer

The profit-maximizing entrance fee under two-part pricing is set equal to the marginal cost, which is $5. This ensures that all consumers willing to pay at least the marginal cost will enter, maximizing the number of consumers while the membership fee extracts consumer surplus.

Big Waves Is a Large Water Park