Suppose that the marginal cost of a one-way airfare is $30.

A. If the airline practices perfect price discrimination, how many customers will purchase one-way airfare? How much producer surplus is earned from perfect price discrimination?

B. Suppose the airline cannot price-discriminate and must sell airfare at a single price. What price does the airline charge per ticket? How many tickets are sold at this price? How much producer surplus is earned?

Transcribed Image Text:

Customer Maximum Willingness to Pay (one-way airfare) $150 Martin Adam Tina Tia $130 $110 $90 Kylee Kyler $70 $30 Customer Maximum Willingness to Pay (one-way airfare) $150 Martin Adam Tina Tia $130 $110 $90 Kylee Kyler $70 $30

Answer rating: 100% (QA)

a If the firm practices price discrimination then it will charge the c... View the full answer