Exercise A.8 In a small town there is only one theatre, so the owner company is monopolistic and has a constant marginal cost of €10. A group of potential viewers, made up of workers, has the demand curve Q1 = 80 – P1. Another group of potential viewers, made up of retirees with lower incomes, has the demand curve Q2 = 80 – 2P2. (a) If the local authority authorises price discrimination, determine the monopolist's equilibrium and represent graphically. b) How would the result vary if you could discriminate prices? Represent graphically. c) Relate the equilibrium prices of the previous section with the elasticities of demand of the two groups of spectators. (d) If the monopolist could apply a double tranche tariff, what usage and entry fee would he set if the latter could be different for each group? What benefits would you get? Represent graphicall
Exercise A.8
In a small town there is only one theatre, so the owner company is monopolistic and has a constant marginal cost of €10. A group of potential viewers, made up of workers, has the demand curve Q1 = 80 – P1. Another group of potential viewers, made up of retirees with lower incomes, has the demand curve Q2 = 80 – 2P2.
(a) If the local authority authorises
b) How would the result vary if you could discriminate prices? Represent graphically.
c) Relate the
(d) If the monopolist could apply a double tranche tariff, what usage and entry fee would he set if the latter could be different for each group? What benefits would you get? Represent graphically
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