AMC Theatres Will Soon Charge According to Where You Choose to Sit

EconEye Admin

3 years ago

AMC Theatres is setting ticket prices according to where patrons sit in the auditorium. Front row seats are Value Sightline seats and cost less, and seats in the middle are Preferred Sightline seats and cost more. The remaining Standard Sightline seats are available for a standard admission ticket.—npr.org

Answer the following questions to check your understanding of the story.

1) Why is AMC Theatres able to price discriminate?

AMC Theatres can price discriminate because ________________.

a) AMC Theatres is a monopoly and all monopolies price discriminate

b) the cost of providing seats varies according to their location in the movie theatre

c) movie goers go to a movie theatre for the experience and don’t care where they sit

d) movie goers differ in the value they place on their location in the movie theatre

Wrong! - How can AMC Theatres discriminate among groups of movie goers? Do the groups of movie goers differ or does the cost of providing seats in different parts of the theatre differ? Do all monopolies price discriminate?

Well done! - Movie goers differ in the value they place on their location in the movie theatre—their marginal benefit and willingness to pay differ. AMC Theatres can price discriminate by differentiating among the different groups of movie goers.

2) Why does AMC Theatres price discriminate?

AMC Theatres price discriminates ________________.

a) to convert some consumer surplus into economic profit

b) to lower its costs and increase economic profit

c) to increase consumer surplus by allocating movie seats by willingness-to-pay

d) to eliminate consumer surplus

Wrong! - The goal of AMC Theatres is to maximize economic profit. How does AMC Theatres’ price discrimination maximize economic profit?

Correct! - The goal of AMC Theatres is to maximize economic profit. When AMC Theatres price discriminates, movie goers pay a price that is closer to their marginal benefit, so some consumer surplus is converted into economic profit.

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