An amusement park faces large fixed costs of $500,000 per month and low average variable costs of $10 per visitor. It charges all visitors a flat entry fee of $50 for unlimited rides.
a. What is the breakeven point for this park?
b. The park currently has 42,000 visitors a month and proposes to raise its entry fee to $60 per person in order to cover the cost of a new Harry Potter-themed ride, What is the new breakeven point if the variable cost increases to $15 per visitor?
c. If the park now receives 25,000 visitors a month because of the increase in interance fee in part (b), will the park still be profitable?