Question

a. Price discrimination is only possible in a (Click to select)(monopoly,long-run,perfectly competitive,unprofitable) market structure.

Suppose you are advising Five Banners Amusement Park, which is the only such firm in the state. Two types of visitors are interested in the park: middle-class families with young kids, and teens/college students.

b. What is wrong (from the perspective of Five Banners' revenue) with charging all visitors the same high admissions price?

• * People will expect extremely awesome rides, which are expensive to build.

• * Five Banners would have to pay its employees more.

• * Teens and college students would not be able to visit, even though they would have if the price was lower.

• * Five Banners would make less money on food sales.

c. What is wrong (from the perspective of Five Banners' revenue) with charging all visitors the same low admissions price?

• * Five Banners would start to attract competitors.

• * Five Banners will get less revenue than it could have from the families, who are willing and able to pay more.

• * The park will be overwhelmed by visitors, leading to unsafe conditions.

• * Five Banners would have to pay its employees less.

d. If Five Banners engages in price discrimination, the number of people visiting the park will be (Click to select)(the same as, less than, more than) if they charged everyone the same high monopoly price; and will be (Click to select)(the same as, more than, less than) the socially optimal number of visitors that would happen in a perfectly competitive market.

Answer 1