The Snow City ski resort caters to both out-of-town skiers and local skiers. The demand for ski tickets for each market segment is independent of the other market segment. The marginal cost of servicing a skier of either type is $50. Suppose the demand curves for the two market segments are:
Out-of-towners: Q0= 1000-5P
Locals: Q1= 1000-10P
(a) If the resort charges one price to all skiers, what is the profit maximizing price. Calculate how many tickets will be sold to each group. What is the total profit.
(b) If the company sells tickets at different prices to the two market prices what is the optimal price and quantity for each segment? What are the total profits for the ski resort?