A downhill ski area is experiencing a decline in the number of lift tickets sold, falling revenues, and inadequate profits. The average price of a lift ticket is $20 and there are 2,500 tickets sold daily on average. The estimated price elasticity of demand is 1.5 and the lifts are currently operating at an average of 75 percent of capacity. Which of the following methods is most likely to increase the ski area's revenues and profits. A. a 10 percent increase in the average price of a lift ticket.B. an aggressive advertising campaign.C. a 10 percent increase in the average price of a lift ticket combined with an aggressive advertising campaign.D. a 10 percent decrease in the average price of a lift ticket.

Given the scenario, it seems the ski area is facing declining revenues despite operating below full capacity. Let's analyze the options:

A 10 percent increase in the average price of a lift ticket: Considering the price elasticity of demand is 1.5, a 10 percent increase in price might result in a 15 percent decrease in quantity demanded (assuming elasticity holds). This could potentially lead to a reduction in the number of tickets sold to 2,125 tickets daily (a 375 ticket decrease). However, the revenue per ticket increases to $22, resulting in total revenue of $46,750, which is higher than the current revenue ($50,000).

An aggressive advertising campaign: Advertising might help attract more customers, but without any change in pricing, it might not directly address the revenue issue unless it significantly boosts ticket sales beyond the anticipated 2,500 daily average.

A 10 percent increase in the average price of a lift ticket combined with an aggressive advertising campaign: This combines both strategies. If the increase in price leads to a decrease in demand to 2,125 tickets, but the advertising campaign brings in additional customers, the overall effect on revenue might vary.

A 10 percent decrease in the average price of a lift ticket: A decrease in price might lead to an increase in the number of tickets sold, possibly above the current average of 2,500 tickets daily. However, if the increase in ticket sales does not offset the price reduction in revenue per ticket, the total revenue might decrease.

Given the elasticity and the current situation, the most likely option to increase revenues and profits could be Option A: a 10 percent increase in the average price of a lift ticket. While it might reduce the number of tickets sold, the increase in price could potentially compensate for the decrease in quantity, resulting in higher total revenue. However, the impact on profits should also be considered factoring in the cost structure and any potential changes in variable costs associated with increased or decreased ticket sales.