A movie monopolist sells to students and adults.The demand function for students is and the demand function for adults is The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.What is the monopolist's profit from adults?
A) $400
B) $2400
C) $2500
D) $0

Question

A movie monopolist sells to students and adults.The demand function for students is  and the demand function for adults is  The marginal cost is $2 per ticket.Suppose the movie theater can price discriminate.What is the monopolist's profit from adults?
A) $400 
B) $2400 
C) $2500 
D) $0

Quizplus · Accepted Answer

To find the optimal price and quantity for each market, we need to solve for the two profit-maximizing equations:

For students: 
MC = MRs = 22 – 2Ps 
=> Ps = 10

For adults: 
MC = MRa = 16 – 2Pa 
=> Pa = 7

Thus, the movie theater should charge $10 per ticket to students and $7 per ticket to adults.

To find the monopolist's profit from adults, we need to calculate the total revenue and total cost for the adult market:

TRa = 16(Pa)(Qa) 
= 16(7)(300) 
= $33,600

TCa = (MC)(Qa) 
= (2)(300) 
= $600

Profita = TRa – TCa 
= $33,000

Therefore, the monopolist's profit from adults is $2500.

A Movie Monopolist Sells to Students and Adults