Homework Sourse96 Tue 1029 PM a E Safari File Edit View History Bookmarks W
96% Tue 10:29 PM a E Safari File Edit View History Bookmarks Window Help 99 rpm M smartsite.ucdavis.edu O Secure Search... McAfee k 2600 SmartSite@UCDavis ARE 10 https://smartsite.ucdavis.edu https://smartsite.ucdavis.edu https://smartsite.ucdavis.edu... Chegg eS 4. Table 10.11 Customer Maximum Willingness to Pay me (one-way airfare) $150 Martin pe 2 $130 Adam Tina $110 Tia $900 Voo $70 Kylee $30 Kyler WSers Reference: Ref 10-22 Contro (Table 10.11) Suppose that the marginal cost of a one-way airfare is $30 a. If the airline practices perfect price discrimination, how many customers will purchase one- way airfare? How much producer surplus is earned from perfect price discrimination? e Pics b. Suppose the airline cannot price-discriminate and must sell airfare at a single price. What price does the airline charge per ticket? How many tickets are sold at this price? How much producer surplus is earned? Work
Solution
a) Marginal cost of one - way airfare is $ 30 . If the airlines practices perfect price discrimination then 5 customers will purchase on-way airfare . The producer surplus = $ 150 - $ 30
Producer surplus = $ 120
b) Suppose the airline cannot price discriminate and must sell airfare at a single price . The price the airline charges per ticket will be equal to its marginal cost of $ 30
Price = $ 30
At this price 6 tickets are sold ; the producer surplus earned at this price is zero .
| Customer | Maximum willingness to pay |
| Martin | $150 |
| Adam | $130 |
| Tina | $110 |
| Tia | $90 |
| Kylee | $70 |
| Kyler | $30 |
