Question

Refer to Figure 7.2. If Happy Times Theater charges one price to day customers and another price to night customers, then the day price will be

Demand at Happy Times Theater Total Demand: Q1 = 600 - 60 P4 or Py = 10 - .016707 Daytime demand: Qa = 300 - 40Pa or Pa = 7.5 = .0250a Nighttime demand: Qn = 300 - 20P, or Px = 15 - .050 MC = 5 Figure 7.2

Answer 1

For daytime demand

P = 7.5 - 0.025Q

Total Revenue = Q*P = 7.5Q - 0.025Q²

MR=d(TR) / dQ = 7.5 - 0.05Q

MR = MC ( profit maximization condition)

7.5 - .05Q = 5

Q = 50

P = 7.5 - 0.025*50 =$6.25

the day price will be $6.25