1. (8)a.) (4) The USPS charged $0.50 per stamp in 2021, and allows stamps.com to sell a sheet of twenty $0.50 stamps with personalized photos for $1.20 per stamp. Stamps.com keeps the extra beyond the $0.50 it pays the USPS. If stamps.com is acting as a profit maximizing monopolist, what is their Lerner Index and what is the price elasticity of demand for a customized stamp?

b.) (4) Suppose a movie theater determines that the elasticity of demand for movie tickets is -2.0 for senior citizens and -1.5 for adults under age 65, and the marginal cost is $2 per consumer. Use the Lerner index to determine the price senior citizens should be charged and the price adults under age 65 should be charged in order to maximize profits.

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