Intermediate Microeconomics Revenue and Profit Max Question?
Imagine there's only one movie theatre near a school campus. Local demand for movies is given by:
q(p) = 500-20p
This monopoly seller has costs given by:
C(q) = 50+q
a) What is the profit function?
b) What is the theatre's maximizing q* and p*?
c) The school is worried about student stress and thinks going to the movies is a good way to relax. If the school purchases the theatre and lowers the price, what would be the maximizing amount of movie tickets they could sell in the short run and still remain in business (assuming that fixed costs are sunk)? What would their profits be?
d) How much does consumer surplus change from the scenario in (b) to the scenario in (c)?