Problem 2: Third-Degree Price Discrimination.The State College Area High School football team is choosing their ticket pricing
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Problem 2: Third-Degree Price Discrimination.The State College Area High School football team is choosing their ticket pricing scheme. There are two types of consumers: Students (S) and Non-Students (N). The inverse demand by students isPS= 703QSand the inverse demand by Non-Students isPN= 1005QN. The marginal cost of ticket production isMC= 10 for all consumers.
1. Suppose that the team sets two separate ticket prices, one for Students and one for Non-Students.
- a)What is the non-student ticket price? How many non-student tickets are sold?
- b)What is the student ticket price? How many non-student tickets are sold?
- c)What are the team's profits?
- d)Briefly describe what will happen if the students can somehow re-sell their tickets
- to non-students.
2. Suppose the school board changes its rules so that the team can no longer offer student discounts.
a)Find the market (inverse) demand curve.
b)What single price and quantity will the team set?
c)What are team's profits?
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