10. The Collegetown movie theater serves 900 students and 100 professors in town. Each student’s willingness to pay for a movie ticket is $5. Each professor’s willingness to pay is $10. Each will buy only one ticket. The movie theater’s marginal cost per ticket is constant at $3, and there is no fixed cost.
Suppose the movie theater cannot price-discriminate and charges both students and professors the same price per ticket. If the movie theater charges $5, who will buy tickets and what will the movie theater’s profit be? How large is consumer surplus?
If the movie theater charges $10, who will buy movie tickets and what will the movie theater’s profit be? How large is consumer surplus?
Assuming the movie theater can price-discriminate between students and professors by requiring students to show their student ID, charging students $5 and professors $10, how much profit will the movie theater make? How large is consumer surplus?