6. Price-discriminating firm Sharon owns a plot of land in the desert that isn\'

Question

6. Price-discriminating firm Sharon owns a plot of land in the desert that isn't worth much. One day, a giant meteor falls on her property. The event attracts scientists and tourists, and Sharon 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 demand (D) curves and marginal revenue (MR) curves for the two markets. Sharon's marginal cost of providing admission tickets is zero. Market A Market B 10 10 MR MRo D 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Admission tickets per day) 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Admission tickets per day) Suppose that at first, Sharon charges the same price of $4 per admission in both markets so that the total number of admissions demanded is Suppose now that Sharon decides to charge a different price in each market. To maximize revenue, Sharon should charge$ admission in Market A and$ tickets per day per per admission in Market B. At these prices, she will sell a total quantity of admission

Explanation / Answer

1-At Price=$ 4, Then P and Demand curve intersect in Market A, Q1=6 unit and in Market 2, Q2=2,

then Total demanded=(4+2)= 6 UNIT

2- To Maximize total Revenue is where, MR=MC, In market A, Qa=5, Pa=5, sateisfied the condition

and in market 2, MR=Mc, Q2=3, Pb=3

3- Non discriminatory, TR=(Total Q)* P= 4*6=$24

Discriminatory, TR=Pa*Qa+Pb*Qb=(5*5)+(3*3)=$ 34

Sharon charges lower price in the marketwith relatively higher price elasticity of demand.

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