question archive Price-discriminating firm Lorenzo owns a plot of land in the desert that isn't worth much
Price-discriminating firm Lorenzo owns a plot of land in the desert that isn't worth much
Subject:EconomicsPrice: Bought3
Price-discriminating firm Lorenzo owns a plot of land in the desert that isn't worth much. One day, a giant meteor falls on his property. The event attracts scientists and tourists, and Lorenzo 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 demand (D) curves and marginal revenue (MR) curves for the two markets. Lorenzo's marginal cost of providing admission tickets is zero. (? ) (?) Market A Market B 10 10 PRICE (Dollars per ticket) N PRICE (Dollars per ticket) 4 N MR. DA MR DE 3 5 3 5 QUANTITY (Admission tickets per day) QUANTITY (Admission tickets per day) Suppose that at first, Lorenzo charges the same price of $4 per admission in both markets so that the total number of admissions demanded is Suppose now that Lorenzo decides to charge a different price in each market. To maximize revenue, Lorenzo should charge $ per admission in Market A and $ |per admission in Market B. At these prices, he will sell a total quantity of admission tickets per day. Complete the following table by calculating Lorenzo's total revenue from selling in both markets under the nondiscriminatory as well as the discriminatory price policy. Price Policy Total Revenue Nondiscriminatory $ high Discriminatory low Lorenzo charges a lower price in the market with a relatively price elasticity of demand.
