Assume you own a movie theater, and you would like to have senior discounts, but

Question

Assume you own a movie theater, and you would like to have senior discounts, but still maximize profits for your company. Assume that you have constant marginal costs of $6. The table below shows the various schedules of prices and quantities demanded for both senior citizens and other customers. What price should you charge senior citizens, and what price should you charge others?

Senior Citizens                    Other Customers

Quantity

Price

Quantity

Price

1

$10

1

$12

2

$9

2

$11

3

$8

3

$10

4

$7

4

$9

5

$6

5

$8

6

$5

6

$7

7

$4

7

$6

Quantity

Price

Quantity

Price

1

$10

1

$12

2

$9

2

$11

3

$8

3

$10

4

$7

4

$9

5

$6

5

$8

6

$5

6

$7

7

$4

7

$6

Explanation / Answer

For Senior Citizens:

Price = $8

Explanation: At price of $8, the equilibrium condition,i.e. MR = MC = $6 is satisfied.

For Other Customers:

Price = $9

Explanation: At price of $9, the equilibrium condition,i.e. MR = MC = $6 is satisfied.

Senior Citizens   Other customers Q P($) TR($) MR($) Q P($) TR($) MR($) 1 10 10 - 1 12 12 - 2 9 18 8 2 11 22 10 3 8 24 6 3 10 30 8 4 7 28 4 4 9 36 6 5 6 30 2 5 8 40 4 6 5 30 0 6 7 42 2 7 4 28 -2 7 6 42 0

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