9. Price-Discriminating Monopolist 9. Price-discriminating monopolist Aa Aa Hube
ID: 1203330 • Letter: 9
Question
9. Price-Discriminating Monopolist
9. Price-discriminating monopolist Aa Aa Hubert, a retiree, owns and lives on a piece of land in the desert that isn't worth much. One day, a giant meteor falls in the middle of his property. As it turns out, two groups of people are interested in visiting it: scientists (Market A) and tourists (Market B). Hubert decides to sell tickets to visit the meteor in both Market A and Market B. He stays home all day anyway, so collecting money from visitors isn't a problem for him. Therefore, you can assume he has zero costs The demand (D) and marginal revenue (MR) curves for the two markets are shown on the two graphs below Market A Market B PRICE IN MARKET A (Dollars per ticket) PRICE IN MARKET B (Dollars per ticket) 40 40 32 32 24 24 MR MR 1 23 4 5 6 789 10 1 23 4 5 6 789 10 QUANTITY IN MARKET A (Tickets per hourl QUANTITY IN MARKET B (Tickets per hour) Suppose Hubert has to charge the same ticket price in each of the two markets. If he sets a price of $16 per ticket, the total quantity demanded will be tickets per hour.Explanation / Answer
1) total demanded will be 8 tickets per hour. ( 6 in maket A and 2 in market B). It can be calculated by AR curve(demand curve) at price $16.
2) $ 20 should be charged in market A and $12 in market B. total quantity of 8 ticket per hour.
3) he will earn revenues of $128 per hour by chargeing $16 in both the market. If he can discriminate in each market, he will charge $20 in market A and $12 in market be and can earn revenues of up to $136 ( $20*5 + $12*3)
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