Answer to Question #274623 in Microeconomics for Imash

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 = 4 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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