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Fullah Playhouse, a Theatre Company in Kuwait City, Caters to Two

Question 19

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  Fullah Playhouse, a theatre company in Kuwait city, caters to two groups of customers: students and the non-student population. Figure 12-2 shows the demand curves for the two groups of customers. -Refer to Figure 12 -2. Suppose Fullah Playhouse price discriminates. Which of the following statements is true? A)  By charging two different prices, the theatre company essentially allows those willing to pay higher prices to subsidize those who are not. B)  By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby increasing economic efficiency. C)  By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby improving equity. D)  Fullah Playhouse will earn higher profits if it charges a single price - an average of the two prices - instead of charging two different prices to the two different groups of customers. Fullah Playhouse, a theatre company in Kuwait city, caters to two groups of customers: students and the non-student population. Figure 12-2 shows the demand curves for the two groups of customers.
-Refer to Figure 12 -2. Suppose Fullah Playhouse price discriminates. Which of the following statements is true?


A) By charging two different prices, the theatre company essentially allows those willing to pay higher prices to subsidize those who are not.
B) By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby increasing economic efficiency.
C) By charging two different prices, the theatre company has redistributed some profits from those who can pay higher prices to those who cannot, thereby improving equity.
D) Fullah Playhouse will earn higher profits if it charges a single price - an average of the two prices - instead of charging two different prices to the two different groups of customers.

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