Consider the following demand of tourists (T) and locals (L) for spots in a race: SQ" = 1,700 – 5p lQ! = 2,400 – 10p (p' = 340 – 0.2Q lp =D240-0.1Q %3D %3D %3D The marginal cost of the race organizer, the only seller of race spots in this market, is constant and equal to $100 for both tourists and locals: MC(Q) = 100 a. Find the profit-maximizing quantities and prices charged by the race organizer if they can practice group price discrimination, treating each group as a different market segment. What is the price for locals? And for tourists? What are the corresponding quantities Q and Q"? b. Graphically show the profit-maximization for the previous item. Carefully label all relevant points and curves. Hint: Use two different graphs. c. Suppose the organizer cannot price discriminate anymore (locals and tourists represent the same single market). Find the profit-maximizing quantity and price. Hint: To find the combined demand you must add the two segmented demands, that is, Q = Q" + Q' = 4,100 – 15p. %3D %3D

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Equilibrium Price and Quantity

Equilibrium refers to a state of balance that comes about because there is equality in all forces.