Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent’s cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent uses a pricing practice called price discrimination and charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent’s demand is:

Passenger Type

Willingness to Pay

Demand per day

Adults

$18

70

Children

$10

25

Senior Citizens

$12

55

Assume that Vincent’s customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day.
What is Vincent’s cost of serving all passengers demanding a tour on a typical day?
What is Vincent’s profit on a typical day?
One of Vincent’s friends tells him he would be more profitable if he charged a single price of $18. Assuming no changes in consumer demand, what would Vincent’s profit be if he charged every customer $18? (3 points)

Vincent’s cost of serving all passengers demanding a tour on a typical day is $1350. Vincent’s profit on a typical day is $820. Vincent’s profit will be increased he charged every customer $18.

What is price discrimination?

A selling tactic known as price discrimination involves charging clients various rates for the same good or service depending on what the vendor believes they can persuade the customer to accept.

When a merchant uses pure price discrimination, they charge each consumer the highest price they will agree to.

The calculation of the profit of the Vincent is done as follows

1.Number of the tour operated by the Vincent on a typical day=

= Adult demand + children demand + senior citizens demand/ Bus capacity

= 70+25+55/50

= 150/50

= 3

Total cost of the tour = $450*3

= $1350

2. Total Revenue on a typical day = Adult demand * willingness to pay+ Children demand* willingness to pay + senior demand * willingness to pay

= 70* $18 + 25* $10+ 55 * $12

= $2170

Profit = total revenue - total cost

= $2170 - $ 1350

= $820

If he charged every customer $18 with every customer then his profit will be calculated as follows:-

Total Revenue on particular day = Adult demand * $18 + Children's demand * $18 + senior's demand * $18

= 70 *18+25*18+55*18

= $1260+$450+$990

= $ 2700

Profit = Total Revenue - Total cost

= $ 2700 - $ 1350

= $ 1350

Therefore, the profit charged on the price $18 is $1350 which is greater than the previous profit.

Learn more about Price determination here:

https://brainly.com/question/14090451

#SPJ1