As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that revealed two different demand curves at your movie theaters. On weekends the inverse demand function is PWeekend 15-0.001 QWeekend _ and on weekdays the inverse demand function is PWeekday 10 0.001 * QWeekday where Q is the number of movie goers and P is the price of a movie. You acquire legal rights from movie producers to show their films for $20,000 per movie, plus a $2 "royalty" for each movie-goer entering your theaters (the average moviegoer in your market watches a movie only once). MRWeekend 15 -0.002 QWeekend MRWeekday 10-0.002"QWeekday 1. What are the profit maximizing prices and quantities for Weekend and Weekday markets? 2. Draw the graphs of both the Weekend and Weekday markets and determine the optimum prices and quantities 3. What are the elasticities of demand for the Weekend and Weekday markets? 4. For third degree price discrimination, what is the relationship between pricing and elasticity of demand in the two markets? 5. Under what conditions can a firm do third degree price discrimination?

As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that revealed two different demand curves at your movie theaters. On weekends the inverse demand function is PWeekend 15-0.001 QWeekend _ and on weekdays the inverse demand function is PWeekday 10 0.001 * QWeekday where Q is the number of movie goers and P is the price of a movie. You acquire legal rights from movie producers to show their films for $20,000 per movie, plus a $2 "royalty" for each movie-goer entering your theaters (the average moviegoer in your market watches a movie only once). MRWeekend 15 -0.002 QWeekend MRWeekday 10-0.002"QWeekday 1. What are the profit maximizing prices and quantities for Weekend and Weekday markets? 2. Draw the graphs of both the Weekend and Weekday markets and determine the optimum prices and quantities 3. What are the elasticities of demand for the Weekend and Weekday markets? 4. For third degree price discrimination, what is the relationship between pricing and elasticity of demand in the two markets? 5. Under what conditions can a firm do third degree price discrimination?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 1E

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As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P = 20 – 0.001Q; on weekdays, it is P = 15 – 0.002Q. You acquire legal rights from movie producers to show their films at a cost of $25,000 per movie, plus a $2.50 “royalty” for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once).
As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P = 20 − 0.001Q; on weekdays, it is P = 15 − 0.002Q. You acquire legal rights from movie producers to show their films at a cost of $25,000 per movie, plus a $2.50 “royalty” for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once). Devise a pricing strategy to maximize your firm’s profits.