You operate a movie theatre and have noticed that demand for movies varies during the day. The early movie goers are more sensitive to the price that the evening movie goers. Suppose that the demand curves for the typical consumer in these two time periods are given by

Pearly= 6 - QearlyandPlate= 12 - Qlate

In addition, suppose that the marginal cost of showing a movie is constant and equal to $2.

a.(4) What is the optimal price you will charge to each group, if you engage in3rddegree price discrimination? How many movies will individuals watch in each group?

b.(2)What are total profits from all moviegoers together?

c.(4)Suddenly, you realize that some moviegoers purchase tickets in the afternoon and attend the evening show (the tickets look identical) and you can't price discriminate anymore. What price will you set now? What are profits? Which strategy maximizes overall profits? Why?

d. (2) In general, how is the price charged to each group related to the respective elasticities of demand?