1. The Winter City Ski Resort caters to both out-of-town skiers and local skiers. The demandfor ski tickets for each market segment is independent of the other market segment. Themarginal cost of servicing a skier of either type is $10. Suppose the demand curves for thetwo market segments are given by:
Out of Town: QO = 600 - 10P
Local: QL = 600 - 20P
where P is the price in dollars of a ticket and Q is the number of tickets sold in a month.
a. If the resort charges on price to all skiers, what is the profit-maximizing price? How manytickets will be sold to each group? What is total profit?
b. Which market segment has the highest (in absolute value) price elasticity at this outcome?
c. If the company sells tickets at different prices to the two market segments, what are theprofit-maximizing price and quantity for each segment? What is the total profit for theresort?
d. What techniques might the resort use to implement such a pricing policy? What must theresort guard against, if the pricing policy is to work effectively?