As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that revealed two different demand curves at your movie theaters. On weekends the inverse demand function is PWeekend 15-0.001 QWeekend _ and on weekdays the inverse demand function is PWeekday 10 0.001 * QWeekday where Q is the number of movie goers and P is the price of a movie. You acquire legal rights from movie producers to show their films for $20,000 per movie, plus a $2 "royalty" for each movie-goer entering your theaters (the average moviegoer in your market watches a movie only once). MRWeekend 15 -0.002 QWeekend MRWeekday 10-0.002"QWeekday 1. What are the profit maximizing prices and quantities for Weekend and Weekday markets? 2. Draw the graphs of both the Weekend and Weekday markets and determine the optimum prices and quantities 3. What are the elasticities of demand for the Weekend and Weekday markets? 4. For third degree price discrimination, what is the relationship between pricing and elasticity of demand in the two markets? 5. Under what conditions can a firm do third degree price discrimination?
As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that revealed two different demand curves at your movie theaters. On weekends the inverse demand function is PWeekend 15-0.001 QWeekend _ and on weekdays the inverse demand function is PWeekday 10 0.001 * QWeekday where Q is the number of movie goers and P is the price of a movie. You acquire legal rights from movie producers to show their films for $20,000 per movie, plus a $2 "royalty" for each movie-goer entering your theaters (the average moviegoer in your market watches a movie only once). MRWeekend 15 -0.002 QWeekend MRWeekday 10-0.002"QWeekday 1. What are the profit maximizing prices and quantities for Weekend and Weekday markets? 2. Draw the graphs of both the Weekend and Weekday markets and determine the optimum prices and quantities 3. What are the elasticities of demand for the Weekend and Weekday markets? 4. For third degree price discrimination, what is the relationship between pricing and elasticity of demand in the two markets? 5. Under what conditions can a firm do third degree price discrimination?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 6 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education