This question tackles the decision on whether a monopolist should price discriminate if it has the freedom to do so. It is a long question so it’s gonna be interesting.
1. A theater for Stand-up Comedies has 2 types of customers. There are those who may watch the comedies at almost any price (although the number of visits depends on the price), and those who do not have a good sense of humor and watches it only if the price was below a certain level. The number of visits too depends on the price. The marginal cost for running the theater is constant.
a. Describe the demand facing the monopolist;
b. How would the monopolist decide on how to price the visit if he could distinguish between the 2 types of customers;
c. How would your answer change if the monopolist cannot distinguish between them;
d. In which case will the monopolist make greater profits? Explain your answer.