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Michaela runs a small movie theatre, and all her customers have identical tastes. Each customer's reservation price for the movie is $7, and each customer's
Michaela runs a small movie theatre, and all her customers have identical tastes. Each customer's reservation price for the movie is $7, and each customer's demand curve for popcorn at his concession stand is given by Pc = 5 - Qc, where Pc is the price of popcorn in dollars and Qc is the amount of popcorn in quarts. If the marginal cost of allowing another patron to watch the movie is zero, and the marginal cost of popcorn is $2, at what price should Michaela sell tickets and popcorn if her goal is to maximize her profits? (Assume that Michaela is able to costlessly advertise her price structure to potential patrons.)
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