Suppose that hotel management is able to price-discriminate and that it decides

Question

Suppose that hotel management is able to price-discriminate and that it decides to rent rooms to consumers in segments A and B at different prices. What price would it charge in each of the segments? (Assume that management price-discriminates in a way that maximizes profit and that people who are eligible for the lower price cannot "resell" to those who are charged a higher price.)

The graph below illustrates the demand for rooms at The Open Arms Hotel. It shows the total demand for rooms as well as the demand in both market segments, A and B. All rooms in the hotel are identical. The graph also shows the corresponding marginal revenue curves and marginal cost, which is $40 per room.

Explanation / Answer

C.  $120 in A, $120 in B

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