Consider the Following Scenario to Answer the Following Questions: EJH

question 116

Multiple Choice

Consider the following scenario to answer the following questions: EJH Cinemas,a movie theater next to your university,attracts two types of customers-those who are associated with the university (students,faculty,and staff) and locals who live in the surrounding area.There are 10,000 university customers interested in purchasing movie tickets from EJH Cinemas,with a maximum willingness to pay of $7 per ticket.There are 20,000 local customers interested in purchasing tickets,with a maximum willingness to pay of $9 per ticket.The movie theater incurs a constant marginal cost of $4 per ticket.For simplicity,assume each customer purchases,at most,one ticket.
-If EJH Cinemas decides to practice price discrimination,charging $9 for a standard ticket available to everyone,but only $7 for a ticket if you show your university identification (students,faculty,and staff) ,what will be the amount of consumer surplus?

• A) $0
• B) $5,000
• C) $15,000
• D) $20,000
• E) $25,000

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Definitions:

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