Question: A university museum has two types of visitors. One type is university employees and students; and the other type is people nonaffiliated with the university.

The inverse demand function for university employees and students is given by

P _U = 30 – Q _U

While the nonaffiliated people have the inverse demand function:

P _N = 100 – Q _N

All university associated people carry a university ID card to identify themselves.

The museum has a constant marginal cost of $6 per visit, regardless of the visitor’s type.

1. What are the profit-maximizing museum entrance prices to charge university and nonaffiliated museum visitors? How much profit does the museum earn?
2. If the museum is not allowed to price discriminate and must charge a uniform price, what would be the museum’s profit maximizing price? (Note: the demands for the two types of visitors must be summed to get the market demand function). What happens to the museum’s profits in B as compared to the levels in part A?

Price: $2.99

Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document