The movie distributor charges a movie theatre $4 per ticket to rent a movie. Suppose the theatre can seat a maximum of 200 people. The demand for the movie is different for the afternoon showing and for the evening showing. Based on the demand function P = 10 – Q/10 for the afternoon showing and P = 20 – Q/10 for the evening showing, the marginal-revenue function for the afternoon is MR = 10 – Q/5 and for the evening is MR = 20 – Q/5. a. Calculate the profit-maximizing price in the evening and the afternoon; also calculate how many tickets will be sold for each show. b. Suppose that the movie distributor now charges a flat fee of $1000 to show the movie regardless of the number of tickets sold. Will the movie theatre owner prefer this arrangement? Why or why not?
The movie distributor charges a movie theatre $4 per ticket to rent a movie. Suppose the theatre can seat a maximum of 200 people. The demand for the movie is different for the afternoon showing and for the evening showing. Based on the demand function P = 10 – Q/10 for the afternoon showing and P = 20 – Q/10 for the evening showing, the marginal-revenue function for the afternoon is MR = 10 – Q/5 and for the evening is MR = 20 – Q/5.
a. Calculate the profit-maximizing
b. Suppose that the movie distributor now charges a flat fee of $1000 to show the movie regardless of the number of tickets sold. Will the movie theatre owner prefer this arrangement? Why or why not?
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