6. Price discrimination under monopolyAa AaFelix, a retiree, owns and lives on a piece of land in the desert that isn't worth much. One day, a giant meteor falls inthe middle of his property. As it turns out, two groups of people are interested in visiting it: scientists (Market A) andtourists (Market B). Felix decides to sell tickets to visit the meteor in both Market A and Market B. He stays home allday anyway, so collecting money from visitors isn't a problem for him. Therefore, you can assume he has zero costs.The demand (D) and marginal revenue (MR) curves for the two markets are shown on the two graphs below.PRICE IN MARKET A [Dollars per ticket)403224168Market A0MRADA2 4 6 8 10 12 14 16 18 20QUANTITY IN MARKET A (Tickets per hour]PRICE IN MARKET B (Dollars per ticket]403224168Market B0MRBDB2 4 6 8 10 12 14 16 18 20QUANTITY IN MARKET B (Tickets per hour] Suppose Felix has to charge the same ticket price in each of the two markets. If he sets a price of $16 per ticket, thetotal quantity demanded will betickets per hour.Now suppose Felix can price discriminate by charging a different price in each market. Because Felix has no costs, hechooses prices for scientists and tourists that maximize his total revenue. In order to maximize revenue, Felix shouldchargeper ticket in Market A andper ticket in Market B. At these prices (P), he will sell a totalquantity (Q) oftickets per hour.Refer back to your answers to the previous two questions. Suppose Felix decides that he wants limit admission to16 people per hour, but he still wants to generate the most revenue possible. If Felix is forced to charge everyone thesame price, he will earn revenues ofper hour. If he can price discriminate by charging a different priceper hour.in each market, he can earn revenues of up to

Price discrimination is a strategy employed by monopolies to charge different prices to different…

Felix, a retiree, owns and lives on a piece of land in the desert that isn't worth much. One day, a giant meteor falls in the middle of his property. As it turns out, two groups of people are interested in visiting it: scientists (Market A) and tourists (Market B). Felix decides to sell tickets to visit the meteor in both Market A and Market B. He stays home all day anyway, so collecting money from visitors isn't a problem for him. Therefore, you can assume he has zero costs. The demand (D) and marginal revenue (MR) curves for the two markets are shown on the two graphs below. PRICE IN MARKET A (Dollars per ticket) 40 32 24 16 8 0 Market A 2 MRA DA 46 8 10 12 14 16 18 20 QUANTITY IN MARKET A (Tickets per hour) PRICE IN MARKET B (Dollars per ticket) 40 32 24 16 8 0 Market B 2 MRB DB 68 10 12 14 16 18 20 QUANTITY IN MARKET B (Tickets per hour]

Felix, a retiree, owns and lives on a piece of land in the desert that isn't worth much. One day, a giant meteor falls in the middle of his property. As it turns out, two groups of people are interested in visiting it: scientists (Market A) and tourists (Market B). Felix decides to sell tickets to visit the meteor in both Market A and Market B. He stays home all day anyway, so collecting money from visitors isn't a problem for him. Therefore, you can assume he has zero costs. The demand (D) and marginal revenue (MR) curves for the two markets are shown on the two graphs below. PRICE IN MARKET A (Dollars per ticket) 40 32 24 16 8 0 Market A 2 MRA DA 46 8 10 12 14 16 18 20 QUANTITY IN MARKET A (Tickets per hour) PRICE IN MARKET B (Dollars per ticket) 40 32 24 16 8 0 Market B 2 MRB DB 68 10 12 14 16 18 20 QUANTITY IN MARKET B (Tickets per hour]

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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