Question

2 Clive runs his own cinema. The latest instalment of a highly popular science fiction movie series will be released next week. Based on international box office ticket sales, it is guaranteed to be a sell-out at his cinema. Clive decides to hold midnight screenings to accommodate the extra demand in the first week. However, he will have to pay a higher than usual rate for casual staff to work overtime in the first week, so he decides to charge twice the normal ticket price. Which of the following statements are true: Clive's decision to price discriminate could help lead to higher profits if he can adequately cover his costs. Clive is third degree price discriminating if he is charging more for the first week on the basis of customers being loyal fans of the film series. Clive would be peak load pricing for the first week on the basis of having higher marginal costs to screen the movies. Clive's decision to price discriminate will lead to a lower producer surplus.

Answer 1

True statements are:

Clive is third degree price discriminating if he is charging more for the first week on the basis of customers being loyal fans of the film series.

Clive would be peak load pricing for the first week on the basis of having higher marginal costs to screen the movies.