Reference no: EM132519052
The Grand Theater is a movie house in a medium-sized college town. This theater shows unusual films and treats early-arriving moviegoers to live organ music and Bugs Bunny cartoons. If the theater is open, the owners have to pay a fixed nightly amount of $500 for films, ushers, and so on, regardless of how many people come to the movie. For simplicity, assume that if the theater is closed, its costs are zero. The nightly demand for Grand Theater movies by students is QS = 220-40PS, where QS is the number of movie tickets demanded by students at price PS. The nightly demand for non student moviegoers is QN = 140-20PN .
(a) If the Grand Theater charges a single price, PT, to everybody, then at prices between 0 and $5.50, find the aggregate demand function for movie tickets.
(b) What is the profit- maximizing number of tickets for the Grand Theater to sell if it charges one price to everybody? Find the profit-maximizing price. How much profit would the Grand make? How many tickets would be sold to student and how many to nonstudents?
(c) Suppose that the cashier can accurately separate the students from the non students at the door by making students show their school ID cards. Students cannot resell their tickets and nonstudents do not have access to student ID cards. Then the Grand can increase its profits by charging students and non students different prices.
What price will be charged to students? How many student tickets will be sold? What price will be charged to non students? How many nonstudent tickets will be sold? How much profit will the Grand Theater make?
(d) Suppose now due to renovations, the Grand Theater can hold only 150 people and that the manager wants to maximize profits by charging separate prices to students and to non students.
If the capacity of the theater is 150 seats, how many student tickets should the Grand sell to maximize profits? What price is charged to the students? How many non student tickets are sold? What price is charged to non students? How much profit does the Grand make under this arrangement?
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