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MrGrimey MrGrimey
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6 years ago
Consider a town with a single movie theater, and that movie theater faces a downward sloping demand curve for its tickets. The movie theater has a fixed number of seats available for each show but the marginal cost of filling a seat is zero. Why might it be in the movie theater's interest to not to sell out every show even though the marginal cost of selling additional seats is virtually zero? (A graph will help your answer).
Textbook 
Microeconomics: Theory and Applications with Calculus

Microeconomics: Theory and Applications with Calculus


Edition: 4th
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#1
6 years ago
The firm may or may not choose to sell out the theater depending on the demand (and marginal revenue). The firm will sell up until the marginal revenue is zero. If this occurs at a quantity less than the theater capacity, then it's optimal to leave empty seats. If the marginal revenue is zero beyond the capacity, then the firm will sell out all of its seats.
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