The figure given below shows the demand curves of two classes of buyers for tickets to a football match. Figure 10.4 D 1 : Demand curve of group 1 D 2 : Demand curve of group 2 MR 1 : Marginal revenue of group 1 MR 2 : Marginal revenue of group 2 MC: Marginal cost -Refer to Figure 10.4.What price must be charged to both the groups to maximize profits? A)P₁ B)P₂ C)Group 1 must be charged P₁ and group 2 must be charged P₂. D)Group 1 must be charged P₂ and group 2 must be charged P₁. E)Both the groups must be charged a price that is equal to the marginal cost.

Question

Quizplus · Accepted Answer

The profit-maximizing price for each group is at the point where the marginal revenue of that group equals the marginal cost. For Group 1, this occurs at point A on their demand curve (P₁). For Group 2, this occurs at point B on their demand curve (P₂). Therefore, to maximize profits, Group 1 must be charged P₁ and Group 2 must be charged P₂.

The Figure Given Below Shows the Demand Curves of Two