Question
The Starlight Theater is the only movie theater in Terlingua, TX, and therefore operates as a monopoly. The theater has a capacity of 80 seats.
The Starlight Theater is the only movie theater in Terlingua, TX, and therefore operates as a monopoly. The theater has a capacity of 80 seats.
The daily inverse demand curve for movie tickets is p=11-0.1y. (This equation gives the maximum price, p, that the starlight can charge and still sell y tickets).
The daily cost function for the Starlight Theater is C(y) = F+y, for y is less than or equal to 80, where F represents the daily fixed costs (e.g. rental costs for the building, projection equipment, etc) of operating the theater, regardless of how many customers attend a movie showing. (Supplying y >80 cannot be done at any finite cost, due to the fixed theater capacity).
Which of the following regulations on ticket pricing would have the same impact on the Starlight's daily profits as the regulation (from question 3) limiting the maximum theater attendance to 40 customers?
Group of answer choices
A price floor (i.e., minimum allowable price) of $7 per ticket.
A price floor (i.e., minimum allowable price) of $6 per ticket.
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