Price Discrimination The local zoo has hired you to assist them in setting admission prices. The zoo's managers recognize that there are two distinct demand curves for zoo admission. One demand curve applies to those aged 12 to 64, while the other is for children and senior citizens.

The two demand curves are: a = 130 10a cs = 80 20cs. where Pa= adult price, Pcs= children's/senior citizens' price, Qa= daily quantity of adults, and Qcs=

daily quantity of children and senior citizens. Crowding is not a problem at the zoo, so that the managers consider marginal cost to be zero.

a. If the zoo decides to price discriminate, what are the profit maximizing price and quantity in each market? Calculate total revenue in each sub-market.

b. What are the elasticities of demand at the quantities calculated in a) for each market? Are

these elasticities consistent with your understanding of profit maximization and the relationship between marginal revenue and elasticity?

c. Suppose instead that the zoo cannot engage in discriminating practices, so that it can charge only a single price. What price should it charge?

d. Does price discrimination benefit or damage consumers? Use the notion of consumers surplus and calculate it with and without price discrimination to answer your question.