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1. White Mountain Ski Resort (WMSR) has the following demand equations for its customers.
[Connecting the final exam with the first mid-term exam in terms of price elasticity concept]
The demand equation for the resort is as follow with MC of $10.
Q = 1,000 - 30P with corresponding P = 33.33 - 0.033Q with MR = 33.33 - 0.067Q
The demand equation for Out of Town Skiers is Qo = 500 -10P with corresponding P = 50 - 0.1Q with MR = 50 - 0.2Q
The demand equation for local skiers is Ql = 500 - 20P with corresponding P = 25 - 0.05Q with MR = 25 - 0.1Q. VC = MC is still $10 for both skiers.
What are the respective prices you are going to charge for local and out of town skiers? How many local and out of town skiers would you get with your new pricing strategy?
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