Question: You run a movie theater in a small town with only ten people. These ten individuals have willingness-to-pay values of {$1, $2, $3, $4, $5, $6, $7, $8, $9, $10}. Your only cost is a $2.50 fee that you must pay to the film distributor for every ticket you sell. Your marginal cost is, therefore, $2.50.

a. What is the profit-maximizing uniform price (i.e. no price discrimination)? How much profit do you earn at this price level?

b. Suppose that you learn that all of those with low values of {$1, $2, $3, $4, $5} are senior citizens, thereby allowing you to employ a direct price discrimination strategy based on consumer age. What prices should you charge to seniors and non-seniors? How much profit do you earn using this pricing strategy?