How does welfare change if the movie theater described in Table 12.1 goes from charging a single price to perfectly price discriminating?

Transcribed Image Text:

Table 12.1 A Theater's Profit Based on the Pricing Method Used (a) No Extra Customers from Price Discrimination Pricing Uniform, $5 Uniform, $10 Price discrimination* Profit from 10 College Students Profit from 20 Senior Citizens Total Profit $50 $100 $150 $100 $0 $100 $100 $100 $200 (b) Extra Customers from Price Discrimination Profit from 10 College Students Pricing Uniform, $5 Uniform, $10 Price discrimination* $50 $100 $100 Profit from 5 Senior Citizens Total Profit $25 $75 $0 $100 $25 $125 "The theater price discriminates by charging college students $10 and senior citizens $5. Notes: College students go to the theater if they are charged no more than $10. Senior citizens are willing to pay at most $5. The theater's marginal cost for an extra customer is zero.