Question

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it A. only shows G-rated movies. B. has no monopoly pricing power. C. cannot easily distinguish between the two groups of customers. D. can prevent children from buying the lower-priced tickets and selling them to adults.

Answer 1

The major way through which a movie theatre can increase its profits through price discrimination is by charging more to the adults and a lower price to children if it:

• D. Can prevent children from buying the lower-priced tickets and selling them to adults.

Price discrimination

We should note that a G rated movie is one which is suitable for people of all ages and this cannot be used to create a price discrimination as this essentially means that only a group of people can view and there is a different price for the ticket.

How movie theatres apply price discrimination

With this in mind, we can see that if the movie theatre charges a lower price for children, then if it shows only G rated movies, if it can prevent children from buying the lower priced tickets, then they would increase their profits.

Therefore, the correct answer is option D

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