A movie monopolist sells to students and adults.The demand function for students is Q^d_S = 600 - 100P and the demand function for adults is Q^d_A = 1,200 - 100P.The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.How many tickets does the theater sell to students to maximize profits? A) 2500 B) 500 C) 200 D) 600

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Quizplus · Accepted Answer

To maximize profits through price discrimination, the monopolist sets marginal revenue (MR) equal to marginal cost (MC) for each segment. For students, the inverse demand function is P = 6 - 0.01Q. The MR is derived from the total revenue (TR), which is P*Q. Differentiating TR with respect to Q gives MR = 6 - 0.02Q. Setting MR equal to MC ($2) and solving for Q gives Q = 200 tickets.

A Movie Monopolist Sells to Students and Adults