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Third Degree Price Discrimination: Starplex Cinema is trying to decide whether ornot to use third degree price discrimination. They think that the demand for movietickets by college students is much more elastic than it is for their other patrons.Starplex does some economic studies and finds that the demand for college studentsis given by P = 12 -QS. Starplex also finds that demand for movie tickets by non-col-lege patrons is P = 20 -2QA. Suppose that Starplex has a constant marginal cost of $3.

a. Graph the market for movie tickets on three graphs.

b. One for the totalmovie ticket demand, one for non-student demand, and one for stu-dent demand.

c. Calculate the aggregate marginal revenue curve.

d. What total quantity of movie tickets will be sold by Starplex?

e. What price would Starplex charge if it were a single price monopolistand not a price discriminating monopolist? [Hint: this price is not awhole number, you might want to use your calculator here.]

f. Suppose that Starplex decides to implement third degree price dis-crimination. How many tickets w ll be purchased by college students?What price should Starplex charge college students? [Hint: carry youranswer out to two places past the decimal.]

g. Suppose that Starplex decides to implement third degree price dis-crimination. How many tickets w ll be purchased by non-students?What price should Starplex charge non-students?

Microeconomics, Economics

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