ollege students have a reservation price of $16 for movie tickets. Senior citize
ID: 1123255 • Letter: O
Question
ollege students have a reservation price of $16 for movie tickets. Senior citizens have a reservation price of $14. If the price of a movie ticket is $14 or less, then 5 enior citizens will demand a ticket. However, no senior citizens will demand a ticket at prices above $14. If the price of a movie ticket is $16 or less, then 20 college tudents will demand a ticket. However, no college students will demand a ticket at prices above $16 iven the information in the table, if a movie theater does not price discriminate, then it charges either the highest price the college students are willing to pay or the ne that the senior citizens are willing to pay. Why doesn't it charge an intermediate price? (Hint Discuss how the demand curves of these two groups are unusual) The theater would practice price discrimination by charging college students $16 and senior citizens $14 Uniform, $14 Uniform, $16 Price Discrimination Profit from 20 College Students $280 $320 $320 Profit from 5 Senior Citizens $70 S0 $70 Total Profit $350 $320 $390 hen not price discriminating, the firm does not charge an intermediate price (e.g., a price between $14 and $16) because at prices above $14 and below $16 A. demand is perfectly inelastic in this price range OB. demand is zero in this price range c. demand is kinked in this price range O D. demand is infinite in this price range DE. demand is price sensitive in this price rangeExplanation / Answer
Given the information above, Senior citizens have a reservation price = $14 and College students has a reservation price =$16.
Senior citizens won't pay more than $14 and college students won't pay more than $16.
It doen't charge an intermediate price because demand is kinked in this range. So, option (c) is correct.
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