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Optimal Pricing

As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P = 20 - 0.001Q; on weekdays, it is P = 15 - 0.002Q. You acquire legal rights from movie producers to show their films at a cost of $25,000 per movie, plus a $2.50 "royalty" for each moviegoer entering your theaters (the average moviegoer in your market watches a movie only once).

What price should you charge on weekends?

Instruction: Round your answer to two decimal places.

$

What price should you charge on weekdays?

Instruction: Round your answer to two decimal places.

$

Solution Summary

This solution helps to find out optimal price to charge customers on weekends and weekdays using inverse demand function, marginal revenue and marginal cost with step-by-step calculations.

$2.19