Question: Harry runs a small movie theater whose customers all have
Harry runs a small movie theater, whose customers all have identical tastes. Each customer’s reservation price for the movie is $5, and each customer’s demand curve for popcorn at his concession stand is given by Pc = 4 - Qc , where P c is the price of popcorn in dollars and Qc is the amount of popcorn in quarts. If the marginal cost of allowing another patron to watch the movie is zero, and the marginal cost of popcorn is $1, at what price should Harry sell tickets and pop-corn if his goal is to maximize his profits? (Assume that Harry is able to cost-lessly advertise his price structure to potential patrons.)
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