Question
Dina owns a plot of land in the desert that isn't worth much. One day, a giant meteor falls on her property. The event attracts
Dina owns a plot of land in the desert that isn't worth much. One day, a giant meteor falls on her property. The event attracts scientists and tourists, and Dina decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show demand (D) curves and marginal revenue (MR) curves for the two markets. Dina's marginal cost of providing admission tickets is zero.
Market A0123456789101086420PRICE (Dollars per ticket)QUANTITY (Admission tickets per day)DAMRA
Market B0123456789101086420PRICE (Dollars per ticket)QUANTITY (Admission tickets per day)DBMRB
Suppose that at first, Dina charges the same price of $4 per admission in both markets so that the total number of admissions demanded is
.
Suppose now that Dina decides to charge a different price in each market. To maximize revenue, Dina should charge
per admission in Market A and
per admission in Market B. At these prices, she will sell a total quantity of
admission tickets per day.
Complete the following table by calculating Dina's total revenue from selling in both markets under the nondiscriminatory as well as the discriminatory price policy.
Price Policy | Total Revenue |
---|---|
Nondiscriminatory | |
Discriminatory |
Dina charges a higher price in the market with a relatively price elasticity of demand.
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