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Question
Consider the following scenario to answer the following questions: EJH Cinemas, a movie theater next to your university, attracts two types of customersthose 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
Answer
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