Professor James A. HornstenProblem Set #8 SolutionsECON 202: Introduction to MicroeconomicsPricing, Imperfect Competition & AntitrustNorthwestern UniversityFall 2013Due in class at 12:00PM, Monday, November 181.THIRD DEGREE PRICE DISCRIMINATIONSuppose the total demand for movie tickets can be broken down into two segments. The adult segment isdescribed by PA= 100 – QA, while the student segment is described by PS= 60 –½QS.The constantmarginal (and average total) cost of production is 20.The market is served by a monopoly.a. Find the profit if the monopoly does not distinguish the groups and just charges a uniform price of50 to all customers.A.
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b.Find the profit if the monopoly does distinguish the groups and uses 3DPD. (It can prevent resale).
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c.Read the article fromThe Economistabout pricing, and then use the 3DPD model from part (a) toshow why it's good advice for a salesperson to “walk away” from some potential student clients.
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Profit$MRDresidualMCATCFirm Output, qqSR