Question

Problem 3: Price Discrimination

An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows:

The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits.

Calculate the price, quantity, and profit if:

1. The amusement park charges a different price for adults. (Chart)

2. The amusement park charges a different price for children. (Chart)

3. The amusement park charges the same price in the two markets combined. (Chart)

4. Explain the difference in the profit realized under the two situations. (write an Essay)

Price ($)                      Adult		Children
$5	15		20
$6	14		18
$7	13		16
$8	12		14
$9	11		12
S10	10		10
S11	9		8
S12	8		6
S13	7		4
S14	6		2

Answer 1