Suppose executives at an art museum know that 100 adults are

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 $1,200 $2,600 $1,600

Solution

Suppose executive at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executive 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?

a. $1,200

b. $2,800

c. $1,600

d. $800

Explanation:

Executive knows ‘100’ adults are willing to pay $12 for admission to the museum on a weekday

                100*12 = $1,200

Also know that ‘200’ students are willing to pay$8 for admission on a weekday

                200*8 = $1,600

The cost of operating the museum on a weekday is $2,000

                = 1,200 + 1,600 – 2,000

                = 800

Therefore $800 will earn the museum on a weekday.