Question Details

If the movie theater charges $10, who will buy movie tickets and what will the movie theater- profit be



1. The movie theater in Collegetown serves two kinds of customers: students and professors.
There are 900 students and 100 professors in Collegetown. Each student-
willingness to pay for a movie ticket is $5. Each professor- willingness to pay for a
movie ticket is $10. Each will buy at most one ticket. The movie theater- marginal
cost per ticket is constant at $3, and there is no fixed cost.
a. Suppose the movie theater cannot price-discriminate and needs to charge both
students and professors the same price per ticket. If the movie theater charges $5,
who will buy tickets and what will the movie theater- profit be? How large is consumer
surplus?
b. If the movie theater charges $10, who will buy movie tickets and what will the movie theater- profit be? How large is consumer surplus?
c. Now suppose that, if it chooses to, the movie theater can price-discriminate
between students and professors by requiring students to show their student ID.
If the movie theater charges students $5 and professors $10, how much profit will
the movie theater make? How large is consumer surplus?




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