Question: Rubrics: Computations in A (3 points) Computations in B (3 points) Computations in C (4 points) Active Learning 2: At the Movies You are the
Rubrics:
Computations in A (3 points)
Computations in B (3 points)
Computations in C (4 points)
Active Learning 2: At the Movies
You are the manager of the only movie theater in town. The price you charge is $18 per ticket, and in a given week you sell Q = 1,000 movie tickets. Assume that you incur only a fixed cost of $10,000 in a week.
A.How much profit is the movie theater making?
Total Revenue: P x Q =
Total Cost:
Profit = TR - TC =
- If you are dropping the price to $5, you will be able to sell Q = 2,500 movie tickets. Calculate the profit.
Total Revenue: P x Q =
Total Cost:
Profit = TR - TC =
C.Suggest a way you can price discriminate when selling movie tickets. Calculate the profit if you price discriminate, with P1 = $18 and P2 = $5.
Note: Remember that a total Q = 2,500 is bought by the time the price drops to P2 = $5, but 1,000 tickets are bought at the higher price, P1 = $18.
TR1 =Total Revenue at P1: P1 x Q =
TR2 =Total Revenue at P2: P2 x Q =
Total Cost:
Profit = TR1 + TR2 - TC =
Conclusion:
Hint: Compare the profit levels from A and B with C.
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