Select one and explain your answer briefly. The Paramount movie theatre has a se

Question

Select one and explain your answer briefly. The Paramount movie theatre has a seating capacity of 270. On any given night, there are 180 people who would potentially attend a movie at the Paramount. There are 80 people who are willing to pay up to $13 to attend a movie at the Paramount, and there are an additional 100 people who are willing to pay up to S5 to attend a movie at the Paramount· The total cost (including movie rental, labor, and rent on the theatre) to the theatre owners of showing a movie at the Paramount is fixed at $800 per night no matter how many people watch the movie. A. If they must charge the same price to all buyers, what price should the owners of the Paramount charge for movie tickets in order to maximize their profits? a) s15 b) S5 d) S10 e) $8.89 B. In the problem above, suppose all those people who are willing to pay no more than S5 are students. The theatre decides to offer a S10 discount to anyone with a student ID. What will the total profit of the theatre be? (show work) a) $100 b) $400 c) S900 d) S1200 e) S1700

Explanation / Answer

Ans:

A) Option A, $15

Total profit when $15 per ticket is charged = ($15 * 80) - $800

= $1200 - $800

= $400.

Total profit when $5 per ticket is charged = ($5 * 180) - $800

= $900 - $800

= $100

Hence, in order to maximize their profit, $15 per ticket should be charged.

B) Option C, $900

Total Profit = (80 * $15) + (100 * $5) - $800

= $1200 + $500 - $800

= $900

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