A bar offers female patrons a lower price for a drink than male patrons. The bar
ID: 1097704 • Letter: A
Question
A bar offers female patrons a lower price for a drink than male patrons. The bar will maximize profits by selling a total of 200 drinks (a night). At the current prices, male customers buy 150 drinks, while female customers buy 50 drinks. At this allocation between markets, the marginal revenue from the last drink sold to a female customer is $0.50.
What should the bar do about its pricing?
If the bar sells 151 drinks to males and 49 to females, what will be the increase (decrease) in total revenue?
Explanation / Answer
a. There should not be any price discrimination between male and female customers. Both male and female customers will be offered the same price. Such parity in price will attract male customer more than female customer, which leads to turn in to more profits. Since profit maximization can be done by selling 200 units at a time, selling those items at higher price will be more beneficial, no matter whoever procures.
b. Given, selling price to a female is $0.50. Assuming $0.51 is the price for male. Therefore, the increase or decrease of revenue is as below.
Particulars
Male: 150
Female: 50
Male: 151
Female: 49
Increase/ (Decrease)
Revenue from Male
150
Particulars
Male: 150
Female: 50
Male: 151
Female: 49
Increase/ (Decrease)
Revenue from Male
150
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