Suppose chat the marginal cost of a oneway airfare is 30 If

Suppose chat the marginal cost of a one-way airfare is $30. If the airline practices perfect price discrimination, how many customers will purchase oneway airfare? How much producer surplus is earned from perfect price discrimination? Suppose the airline cannot price-discriminate and must sell airfare at a single price. What price docs the airline charge per ticket? How many tickets are sold at this price? How much producer surplus is earned?

Solution

a.) Marginal cost =30$

If it practices perfect price discrimination,then it will charge each consumer exactly their maximum willingness to pay.So all will purchase it.

Producer surplus=(150-30)+(130-30)+(110-30)+(90-30)+(70-30)+(30-30)

=120+100+80+60+40+0=400

b.)If it cannot discriminate,it charges price greater than MC.

So it charges 70$.

so 5 tickets will be sold at this price.

Producer surplus=(p-mc)Q

=(70-30)5=200