There is another way to solve Learning-By-Doing Exercise 12.5. Recall that marginal revenue can be written as MR = P + (P/Q)Q. By factoring out

There is another way to solve Learning-By-Doing Exercise 12.5. Recall that marginal revenue can be written as MR = P + (ΔP/ΔQ)Q. By factoring out P, we can write Since third-degree price discrimination means that marginal cost equals marginal revenue in each market segment, the profit-maximizing regular and vacation fares will be determined by MRR = MRV = MC. (Remember the marginal cost of both classes of service is assumed to be the same in the exercise.) Thus use this relationship to verify the answer given in the exercise.