Problem: Assume that the highest price a member of the general public is prepared to pay for a movie ticket is $15 and the highest price a student is willing to pay for a movie ticket is $7. The local movie theater is aware of this information and therefore charges $15 for a ticket from the general public and $7 from students.
(a) Please explain how this might result in higher profits for the theater owner rather than charging a price of $15 from all customers. You must explain how profits of the theater owner will increase and not just how revenues might increase.
(b) Would profits be any higher if the theater owner charged a price of $10 from all customers? Please give an explanation.