6. Price-discriminating monopolist Latasha owns a plot of land in the desert tha

Question

6. Price-discriminating monopolist Latasha owns a plot of land in the desert that isn't worth much. One day, a glant meteor falls on her property. The event attracts scientists and tourists, and Latasha decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: sclentists (Market A) and tourists (Market B). The following graphs show demand (D) curves and marginal revenue (MR) curves for the two markets. Latasha's marginal cost of providing admission tickets is zero Market A Market B 10 10 T MR MR 234567810 01 2 347 10 QUANTITY (Admission tickets per day) QUANTITY (Admission tickets per day)

Explanation / Answer

1) Total number of admissions demanded at $ 4 = Market A + Market B = 6 + 2 = 8

2) Revenue is maximised where MR = 0

So, $ 5 would be charged in market A because MR = 0 at quantity 5.

3) $ 3 would be charged in market B because MR = 0 at quantity 3.

4) Total admissions = 5 + 3 = 8

5) Total revenue under nondiscrimination = Price x Quantity = 4 x 6 + 4 x 2 = 24 + 8 = 32

Total revenue under discrimination = 5 x 5 + 3 x 3 = 25 + 9 = 34

6) More elastic

Related Questions

Navigate

• Browse (All)
• Browse 6
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.