Question 8 1 pts Christian runs a pub called the \'Happy Dreams\" which is frequ

Question

Question 8 1 pts Christian runs a pub called the 'Happy Dreams" which is frequented by many celebrities. Given the popularity and location of the pub, Christian has a monopoly position in the market. Each customer's demand curve for drinks per night is given by the following: P 185 3Q. The marginal cost of each drink sold is $5. Christian is considering imposing a cover charge on the pub. Essentially this is a fee that allows you into the pub after which you can purchase as many drinks as you like for $5 each. If Christian is a profit maximizing monopolist and knows the demand curve of each customer, what is the optimal cover charge that Christian should charge so as to maximize profits? $0 $20 O $185 $5400 $5

Explanation / Answer

8)

He would charge the consumer surplus:

CS = (Pmax - MC) x Q/2

CS = (185 - 5) x 60/2 = $ 5400

10) Correct option:

Under the first price discrimination the marginal revenue curve is the demand curve (perfect discrimination)

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