Mayo Destination Water Park Center offers family fun year-round in the Northstar state to locals and out-of-state visitors to the nearby Mayo Center. The demand for day-passes to the water park for each market segment is independent of the other market segment. The marginal cost of providing service to each visitor is $5 per day. Suppose the daily demand curves for the two market segments are:
Locals:
Out of town:
a. If Mayo Destination Water Park Center charges one price to locals, what is the profit maximizing price for locals? How many day-passes will be sold per day to locals?
b. If Mayo Destination Water Park Center charges one price to out-of-towners, what is the profit maximizing price for out-of-town guests? How many day-passes will be sold per day to out-of-town guests?
c. Explain why the relationship between the prices charged to locals versus the prices charged to out of town visitors? Why does this happen?