Question

Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000. How much profit will the museum earn if it engages in price discrimination?

Answer 1

If the museum engages in price discrimination and decides to take both "contracts" (adults and students), the profit the museum will earn is $800.

And it goes like this:

Adults: 100 x $12 = 1.200

Students: 200 x $8 = 1.600

Income: 1.200 + 1.600 = 2.800 total incomes if both contracts happens in the same day.

Profit: 2.800 (Income) - 2.000 (costs) = 800 profit