The Cirque de L’ ́economie is the only Circus in the small rural town of Boomerton. This Circus has unusual acts and treats early-goers, typically senior citizens, to acrobats and trapeze acts. The latter crowd is exposed to gruesome twists, shifts, and turns of supply and demand diagrams. If the Circus is open, the owners have to pay a fixed nightly amount of $1000 for ushers, animals, and so on, regardless of how many people come to the Circus. Assume that if the Circus is closed, the costs are zero. The demand for Cirque de L’ ́economie by senior citizens is Qs = 440 −80Ps, where Qs is the number of circus tickets demanded by seniors at a price Ps. The nightly demand for nonseniors that attend is QN = 280 −40PN.
(a) (5 points) If Cirque de L’ ́economie wanted to charge a single price for all consumers, what is the aggregate demand they will face?
(b) (5 points) What is the profit-maximizing number of tickets for the Circus to sell if it charges a single price? What would the profits be? How many tickets would be sold to seniors and non-seniors, respectively?
(c) (10 points) Suppose that the Circus wants to increase its profits by engaging in price discrimination. Given the information provided, what type of price discrimination would the Circus engage in? What prices would the Circus charge? What would the profits be in this setting?