Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000. Refer to Scenario 15-9. How much profit will the museum earn if it charges all customers $12 for admission?
Answer: As only adults are ready to pay $12 hence at $12 price level only adults will go to museum for admission. So, at $12 price level the total customer is 100 adults.
Museum's total revenue = Price * Number of customers = 12 * 100 = $1,200
Museum's cost = $2,000
Profit = Revenue - Cost =1,200 - 2,000 = - $800
Therefore, at $12 price level the museum faces loss of $800.
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