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.What price per ticket does the theater charge students to maximize profits?

Question

Quizplus · Accepted Answer

To maximize profits, the monopolist sets marginal revenue (MR) equal to marginal cost (MC). For students, the inverse demand function is P = 6 - 0.01Q. The MR is derived as MR = 6 - 0.02Q. Setting MR = MC (2), we solve 6 - 0.02Q = 2, giving Q = 200. Substituting Q = 200 into the demand function, P = 6 - 0.01(200) = 4.

A Movie Monopolist Sells to Students and Adults