Question

You live in a town with 300 adults and 200 children, and you are thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customers:

Price (Dollars)	Adults (Tickets)	Children (Tickets)
20	0	0
18	25	0
16	50	0
14	100	0
12	150	0
10	200	0
8	300	25
6	300	50
4	300	100
2	300	150
0	300	200

To maximize profit, you would charge $____??? for an adult's ticket and $____??? for a child’s ticket. Total profit in this case would be $___???.

The city council passes a law prohibiting you from charging different prices to different customers.

Now you set a price of $____??? for all tickets, resulting in $___?? in profit.

Indicate whether each of the following groups of people is better off, worse off, or the same because of the law prohibiting price discrimination.

Group of People	Better Off	Worse Off	Unchanged
Adults
Children
You, The Producer

Suppose the fixed cost of the play were $2,600 rather than $2,000.

Complete the following sentences indicating how this would change your answers to the previous parts.

In the presence of price discrimination, the adult price of a ticket would INCREASE, REMAIN THE SAME, OR DECREASE?, and the child price would INCREASE, DECREASE, OR REMAIN THE SAME? . Total profit would RISE OR FALL? to $____?.

If price discrimination were banned and the monopolist continued to produce the play no matter what the profit, the price of a ticket would INCREASE, DECREASE, OR REMAIN THE SAME? , and total profit would RISE OR FALL? To $____?.

Answer 1