• Suppose your town has one movie theater, and the nearest theaters are a far drive away.  The movie theater owners pay a constant marginal cost of $200 per night to operate the theater (pay electricity, employees, etc.), even if no customers come in, but 0 fixed costs if the theater doesn’t open.  You have estimated the inverse demand for movie tickets at your theater per night by senior viewers as .  The inverse demand for nonsenior viewers is .  (40 points)
• On separate graphs, plot each type of consumer’s inverse demand curves, along with the firm’s MR and MC curves.  Label axes and curves.
• Suppose the movie theater charges all customers a single-price, .  Plot the total inverse demand curve and the MC curve and MR curves.  Label axes and curves.
• For prices above $7, what is the total inverse demand function?  For prices below $7, what is the total inverse demand function (this one takes more thought/math!!)?
• Assuming this monopoly charges the same price to all customers, find the profit-maximizing quantity of tickets for this monopoly to sell, the profit-maximizing price, the profit generated by the theater, and determine how many tickets are sold to seniors versus nonsenior consumers.
• Now suppose the theater can distinguish senior customers from nonsenior customers and assume that it is not possible to resell your ticket after purchase.  What price would the theater choose to charge its senior customers and its nonsenior customers?  How many of each type of ticket will be sold?
• How much MORE profit does the firm make by price discriminating?

Answer rating: 100% (QA)

ANSWER Please note that the marginal cost I have considered in 2 instead ... View the full answer