A movie theater owner discovered that there are two segments in the population that attend the shows, older and younger people. The theater has a capacity of 400 seats. The incremental cost per viewer is still $10. The demand functions of these markets are as follows:

Older: d_O(p) = 900 - 20p

Younger: d_Y(p) = 500 - 35p

Using a single price structure find the price that maximizes contribution.

Use a non-single price structure and find the prices that maximize contribution for the older and younger individuals.

Fifty (50) seats need to be repaired. Find the prices that maximize contribution for the older and younger individuals under the capacity constraint b=350 seats per show.

What is the opportunity cost for the capacity constrained at b=350? What is the marginal opportunity cost if the theater owner wants to increase the capacity by 20 seats, i.e., from 350 to 370 seats?

The theater owner offers the cheaper price tickets to the younger individuals as a service to the community. However, the tickets for the two populations are identical once they are issued. Older people have realized that if they could get a younger person to buy them tickets, they could get into the show paying less. So, they try to cannibalize the theater. Assume that there is a cannibalization of about 20 percent. Find the prices of the two populations that maximizes contribution under the capacity constraint b=350.

How much would the theater owner would be willing to spend to ensure that cannibalization does not happen?