1. Consider a small college town with a single movie theater.

a. Graph the market for movies in this town. Label clearly the equilibrium price and quantity, as well as other relevant areas. Assume the movie theater treats all customers the same. Also assume constant marginal costs.

b. Now suppose the theater can distinguish between customers. There are two kinds: students and adults. On a new graph, show the separate demand conditions for students and adults. Assume the (constant) marginal cost of providing a seat in the theater is the same for both groups.

c. Would the theater charge the same price to students and adults? Why or why not?

d. Which scenario, a. or b., is more efficient? Why?