Answered: Suppose the movie theater has two types…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Suppose the movie theater has two types of customers: college students and senior citizens. College
students have a willingness to pay $20 and senior citizens have a willingness to pay $5. The theater
potentially has 10 college students and 20 senior citizen customers. The movie theater incurs no cost
when showing the movie, so profit is the same as revenue. How does total surplus change if the
movie theater goes from charging a single price to perfectly price discriminating?

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4. A monopoly sells its good in the US and Japanese markets. The American inverse demand function is
100 - QA, and the Japanese inverse demand function is pj = 80 – 2Q₁. The firm marginal
cost of production is m = 20 in both countries. If the firm can prevent resale, what price will it
charge in both markets?
=

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