Answer to Question #304442 in Economics of Enterprise for Thom

Question

A discriminatory movie monopolist sells the service to college students and lecturers. The demand function for students is 𝑄s = 200 − 25𝑃 and the demand function for lecturers is

𝑄l = 400 − 25P. Marginal cost is $5 per ticket.

(a) Which degree (type) of price discrimination the monopolist applied? Why?

(b) Calculate the amount of ticket the firm sells for students.

(c) Calculate the amount of ticket the firm sells for lecturers.

Answer 1

a) Third-degree price discrimination- occurs when a company charges a different price to different consumer groups.

b) Amount of ticket for students

$𝑄_s = 200 − 25𝑃$

P=8- 0.04Q

TR= Q(8- 0.04Q)= 8Q-0.04Q$^2$

MR= 8- 0.08Q

MC= 5

MR= MC

8- 0.08Q= 5

Q= 37.5

c) Amount of ticket for lecturers

MR= MC

$Q_s$ =400 − 25P

P= 16- 0.04Q

TR= 16Q- 0.04Q$^2$

MR= 16- 0.08Q

MR= MC

16- 0.08Q= 5

Q= 137.5