Poornima owns a plot of land in the desert that isn\'t worth much. One day, a gi
ID: 1122683 • Letter: P
Question
Poornima owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on her property, making a large crater. The event attracts scientists and tourists, and Poornima decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show daily demand (D) curves and marginal revenue (MR) curves for the two markets Poornima's marginal cost of providing admission tickets is zero Market A Market B 18 16 14 12 18 16 14 12 10 MR MRa D 0 3 6 9 12 15 18 21 24 27 30 QUANTITY (Admission tickets) 0 3 6 9 12 15 18 21 24 27 30 QUANTITY (Admission tickets) Suppose that at first, Poornima charges the same price of $8 per admission in both markets so that the total number of admissions demanded is tickets Suppose now that Poornima decides to charge a different price in each market. To maximize revenue (and therefore, profits), Poornima should charge$ per admission in Market A and$ per admission in Market B. At these prices, she will sell a total quantity of admission tickets per day Complete the following table by calculating Poornima's total revenue from selling in both markets under the nondiscriminatory as well as the discriminatory price policyExplanation / Answer
Answer - According to the given diagram, Suppose Poornima charges $8 to every scientists and tourist. Price would be equal to marginal cost. (P=MC)
In market A, P = MC
Poornima will sell 18 admission tickets
In market B, P=MC
Poornima will sell 6 admission tickets
Total ticket sold = 18+6 = 24 admission tickets
Suppose now, Poornima decided to charge different price in each market, to maximize revenue (and therefore profit).Poornima sells admission ticket where, MR=MC
In market A MR=MC at output level 9 tickets. Poornima will charge $14 per ticket.
In the market B, MR = MC at output level of 3 ticket. She will charge $10 per ticket.
Total quantity of ticket that she sell is , = 9 + 3 =12 admission tickets.
Complete the following table.
Poornima Charges higher price in the market with a relatively lower price elasticity of demand.
Pricing Policy Total Revenue (Dollars) Nondiscriminatory 18*8 + 6*8 = 192 Discriminatory 14*9 + 10*3 = 156