Suppose that a film studio rents its movies for two weeks to the three theaters
ID: 1130394 • Letter: S
Question
Suppose that a film studio rents its movies for two weeks to the three theaters in its distribution system. The studio has two movies to rent, an A and a B level movie. The valuations of the two movies by theater are shown in the table below. Assume that the studio must charge the same rents to all theaters. Assume that if a theater is indifferent between any two options, it chooses the one preferred by the studio. Theater Theater 1 Theater 2 Theater 3 Film A Film B $6,000 ,000 $5,000 $12,000 $14,000 $3 $7,000 Use this information to answer questions (7) - (9). If the studio rents each film separately, its maximum revenue is: a) $36,000 b) $34,000 7.Explanation / Answer
Question 7
If Studio fixes rent for Film A at $14,000 and rent for Film B at $6,000 then Theater 2 will rent Film A and Theater 1 will rent Film B.
Total revenue = $14,000 + $6,000 = $20,000
If Studio fixes rent for Film A at $12,000 and rent for Film B at $5,000 then Theater 1 and 2 will rent Film A and Theater 1 and 3 will rent Film B.
Total revenue = ($12,000 * 2) + ($5,000 * 2) = $24,000 + $10,000 = $34,000
If Studio fixes rent for Film A at $7,000 and rent for Film B at $3,000 then each Theater will rent both the films.
Total revenue = ($7,000 * 3) + ($3,000 * 3) = $21,000 + $9,000 = $30,000
So, if the Studio rents each film seperately, its maximum revenue is $34,000.
The correct answer is the option (b).
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.