Answer to Question #272897 in Microeconomics for DIL

Question

Following information shows that a firm offering a good at different prices

to groups of consumers with different levels of willingness to pay.

Inverse Demand for movies: P1 = 20 – 4Q1

Inverse Demand for students: P2 = 10 – Q2

MC = 4Q LKR /ticket

(a) What price and quantity and maximizes profits if the firm charges each

market?

(b) Demonstrate that charging different prices for the two groups results in

higher profits than charging the same price for everyone.

(c) Graph the demand curves, the marginal revenue curves, the marginal cost

curve and highlight the equilibrium.

Answer 1

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