Question

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 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: 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 profit on a typical day $1,350 $2,170 $660 $820

Answer 1

Vincent profit on a typical day can be calculated as follows profit = ((Adults demand times willingness price) + (children demand times willingness price) + (senior citizens demand times willingness price)) - (Fixed price times 3) = (((70 times 18) + (25 times 10) + (55 times 12)) - (450 times 3)) = 1,260 + 250 + 660 - 1,350 = 2,170 - 1,350 = 820