The Broadway show Hamilton is coming to perform for one night. There are two types of consumers interested in the show- current students and rich alumni. The demand curve for the student market is Q= 300-0.4P with marginal revenue MR= 750-5Q. The demand curve for the alumni market segment is Q=600-0.1P with marginal revenue MR=6000-20Q. If the two types of consumers are in the market, the MR=1800-4Q. The cost function is C(Q)=200Q and the marginal cost of serving either customer is MC=200. 1. Assume the show knows there are different types of consumers but can not tell the difference so they must sell tickets at a single price. At what price do all consumers enter the market? What profit-maximizing price and quantity are the tickets sold at?
The Broadway show Hamilton is coming to perform for one night. There are two types of consumers interested in the show- current students and rich alumni. The demand curve for the student market is Q= 300-0.4P with marginal revenue MR= 750-5Q. The demand curve for the alumni market segment is Q=600-0.1P with marginal revenue MR=6000-20Q. If the two types of consumers are in the market, the MR=1800-4Q. The cost function is C(Q)=200Q and the marginal cost of serving either customer is MC=200.
1. Assume the show knows there are different types of consumers but can not tell the difference so they must sell tickets at a single
Monopolist: A monopolist is a single seller in the market and hence he faces the downward sloping demand curve. Hence for profit maximization it requires MR = MC. A monopolist will keep on producing output as long as MR (Marginal revenue) > MC (marginal costs). It will increase his total profits. And it will not produce the additional unit if it has higher MC compared to MR because that would lead to decrease his total profits. Hence, he will produce his output up to the level where MR = MC.
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