Answered: Cho owns a plot of land in the desert…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 6PA

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Price-discriminating firm

Cho owns a plot of land in the desert that isn’t worth much. One day, a giant meteor falls on her property. The event attracts scientists and tourists, and Cho decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show demand (D) curves and marginal revenue (MR) curves for the two markets. Cho’s marginal cost of providing admission tickets is zero.

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6. Price-discriminating firm
Cho owns a plot of land in the desert that isn't worth much. One day, a giant meteor falls on her property. The event attracts scientists and tourists,
and Cho decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B).
The following graphs show demand (D) curves and marginal revenue (MR) curves for the two markets. Cho's marginal cost of providing admission
tickets is zero.
Market A
Market B
10
10
8
2
MR,
D
A
MR,
D.
1
2
3
4
6
7
8
9
10
1
2
3
4
6
7
8
9
10
QUANTITY (Admission tickets per day)
QUANTITY (Admission tickets per day)
Suppose that at first, Cho charges the same price of $4 per admission in both markets so that the total number of admissions demanded
is
Suppose now that Cho decides to charge a different price in each market. To maximize revenue, Cho should charge $
per admission in
Market A and $
per admission in Market B. At these prices, she will sell a total quantity of
admission tickets per day.
Complete the following table by calculating Cho's total revenue from selling in both markets under the nondiscriminatory as well as the discriminatory
price policy.
Price Policy
Total Revenue
Nondiscriminatory
2$
Discriminatory
2$
Cho charges a lower price in the market with a relatively
price elasticity of demand.
PRICE (Dollars per ticket)
PRICE (Dollars per ticket)

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