Seven potential customers are interested in seeing a movie. Since the marginal cost of admitting...

Question

Seven potential customers are interested in seeing a movie. Since the marginal cost of admitting additional customers is zero, the movie theater maximizes its profits by maximizing its revenue

a. What price would the theater charge if it could only charge one price?

b. If the theater could charge two prices, what prices would it choose? Which customers would pay the higher price, and which would pay the lower price?

Robert · Accepted Answer

Given,
a) Since MC of admitting a extra customer is zero, so the theater would charge such a price that the 
all customers could be accomodated. In this example since the minimum price / smallest maximum 
willingness to pay is $6.

Seven potential customers are interested in seeing a movie. Since the marginal cost of admitting additional customers is zero, the movie theater maximizes its profits by maximizing its revenue a. What...

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