Suppose that All Star Cinemas, a theater corporation, has a goal to maximize profit. Right now they are considering charging different prices for movie viewings, depending

on whether it is prime time or not. This is an example of price discrimination, charging different prices in different markets for the same good. They think they can accomplish it because demand is higher during prime time. Assume that the quantity demanded of movie viewings during prime time is m and during non-prime time is n. The demand functions are:

P_m=618-18m

P_n=238-4n

You can assume that the cost of providing movie viewings is the same no matter the time of day so that:

TC=40+6(m+n)

For this question, please round any decimal answers to one place.

(a) Write out the equation for total revenue, TR, earned by All Star when they charge different prices in each market. That is, when they price discriminate.

(b) Write out the equation for total profit, , when they price discriminate.

(c) Find the quantity of movie viewings they should sell in each market in order to maximize total profit. And find the resulting prices of each type of movie viewing. Show that you've found a maximum. What is the total profit made by All Star if they price discriminate in this way?

(d) Now suppose that All Star decides not to price discriminate. That is, they charge the same price in each market. Write out the demand function that All Star will

face in the combined market for its movie viewings.

(e) Write out the equations for total revenue, TR and total profit, , with no price discrimination.

(f) Now how many movie viewings will they sell if their goal is to maximize profit? At what price? What will be their profit? Show all of your work, including verification that you've found a maximum.

(g) Should All Star price discriminate? Why or why not?