Suppose Rialto is the only movie cinema in a small college town, so it is essentially a monopoly for the local movie market. Assume for simplicity that the constant marginal cost MC(Q) of showing a movie is 20 and there are no additional fixed costs. They charge a certain price P for a monthly pass. There is an overall demand curve for movie passes, given by
However, demand in the town has two distinct consumer groups: adults (A) and college students (C). The demand for adults is given by
and the inverse demand for college students is given by
(a) Suppose everybody can easily get a fake student ID and there is no way for UMovie to differentiate one group of consumers from another. As a result, the cinema is forced to charge a single price for both groups. Depict this market in a figure, showing demand, MC, MR, any profits, surplus and deadweight loss.