Figure 16-2

Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers:
students and the non-student population.
Figure 16-2 shows the demand curves for the two groups of customers.
-Refer to Figure 16-2.Suppose Plato Playhouse price discriminates.What is the price charged in the two markets?

Question

Figure 16-2
  
Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers:
students and the non-student population.
Figure 16-2 shows the demand curves for the two groups of customers.
-Refer to Figure 16-2.Suppose Plato Playhouse price discriminates.What is the price charged in the two markets?

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different groups of customers based on their willingness to pay. In this case, Plato Playhouse can charge different prices to students and non-students based on the demand curves shown in Figure 16-2.

The optimal prices in each market are where marginal revenue (MR) equals marginal cost (MC). For the student market, the optimal price is Pc, where MR equals MC. For the non-student market, the optimal price is Pe, where MR equals MC. Therefore, the price charged in the student market is Pc, and the price charged in the non-student market is Pe.

Thus, the correct answer is D: price in the student market = Pc; price in the non-student market = Pe.

Figure 16-2 Plato Playhouse, a Theatre Company in the University Town of in the University