Keep the Highest: 4 6. Price-discriminating monopolist Amy owns a plot of land i
ID: 1144138 • Letter: K
Question
Keep the Highest: 4 6. Price-discriminating monopolist Amy owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on her property, making a large crater. The event attracts scientists and tourists, and Amy decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show daily demand (D) curves and marginal revenue (MR) curves for the two markets. Amy's marginal cost of providing admission tickets is zero. Market A Market B 18 18 14 14 10 MR MR 0 3 69 12 15 18 21 24 27 30 QUANTITY (Admission tickets) 0 3 69 12 15 18 21 24 27 30 QUANTITY (Admission tickets)Explanation / Answer
At price of $ 8, total tickets demanded = Market A + Market B = 18 + 6 = 24 tickets
TR is maximised when MR = 0.
Market A = $ 10
Market B = $ 6
Total quantity = 15 + 9 = 24 tickets
TR from Nondiscriminatory = 24 tickets x 8 = $ 192
TR from discriminatory = 15 x 10 + 9 x 6 = 150 + 54 = $ 204
Less than unit elastic price elasticity of demand.
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