You live in a town with 300 adults and 200 children, and you are thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customers: Price Adults Children (Dollars) (Tickets) (Tickets) 10 0 0 9 100 0 8 200 0 7 300 0 6 300 0 5 300 100 4 300 200 3 300 200 2 300 200 1 300 200 0 300 200 To maximize profit, you would charge $ ? for an adult's ticket and $ ? for a child's ticket. Total profit in this case would be $ ? The city council passes a law prohibiting you from charging different prices to different customers. Now you set a price of $ ? for all tickets, resulting in $ ? in profit. Pic 2 : Indicate whether each of the following groups of people is better off, worse off, or the same because of the law prohibiting price discrimination. Group of People Better Off Worse Off Unchanged Adults Children You, the Producer Suppose the fixed cost of the play were $2,500 rather than $2,000. Complete the following sentences indicating how this would ( ?) change your answers to the previous parts. In the presence of price discrimination, the adult price of a ticket would ( ?) , and the child price would (?) . Total profit would ( rise or fall) ? to $ ? If price discrimination were banned and the monopolist continued to produce the play no matter what the profit, the price of a ticket would (?) , and total profit would (?) to $

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter11: Marketing And Distribution

Section: Chapter Questions

Problem 19AA

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Pic 1 :

You live in a town with 300 adults and 200 children, and you are thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customers:

Price	Adults	Children
(Dollars)	(Tickets)	(Tickets)
10	0	0
9	100	0
8	200	0
7	300	0
6	300	0
5	300	100
4	300	200
3	300	200
2	300	200
1	300	200
0	300	200

To maximize profit, you would charge $ ?

for an adult's ticket and $ ?

for a child's ticket. Total profit in this case would be $ ?

The city council passes a law prohibiting you from charging different prices to different customers.

Now you set a price of $ ?

for all tickets, resulting in $ ?

in profit.

Pic 2 :

Indicate whether each of the following groups of people is better off, worse off, or the same because of the law prohibiting price discrimination.

Group of People	Better Off	Worse Off	Unchanged
Adults
Children
You, the Producer

Suppose the fixed cost of the play were $2,500 rather than $2,000.

Complete the following sentences indicating how this would ( ?) change your answers to the previous parts.

In the presence of price discrimination, the adult price of a ticket would ( ?) , and the child price would (?) . Total profit would ( rise or fall) ? to $ ?

If price discrimination were banned and the monopolist continued to produce the play no matter what the profit, the price of a ticket would (?) , and total profit would (?) to $

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