You live in a town with 300 adults and 200 children, and you are thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $1,000, but selling an extra ticket has zero marginal cost.
Here are the demand schedules for your two types of customers:
Price Adults Children
(Dollars) (Tickets) (Tickets)
10 0 0
9 50 0
8 100 0
7 150 0
6 200 0
5 250 50
4 300 100
3 300 150
2 300 200
1 300 200
0 300 200
To maximize profit, you would charge for an adult's ticket ______ and for a child's ticket ______. Total profit, in this case, would be ______.
The city council passes a law prohibiting you from charging different prices to different customers. Now you set a price of ______ for all tickets, resulting in ______ profit.
Indicate whether each of the following groups of people is better off, worse off, or the same because of the law prohibiting price discrimination.
Group of People Better Off Worse Off Unchanged
Adults
Children
You, the Producer
Suppose the fixed cost of the play were $1,800 rather than $1,000.
Complete the following sentences indicating how this would change your answers to the previous parts.
In the presence of price discrimination, the adult price of a ticket would ________, and the child price would ________.
Total profit would ________ to ________.
If price discrimination were banned and the monopolist continued to produce the play no matter what the profit, the price of a ticket would ________, and total profit would ________ to ________.
