Consider the situation faced by a for-profit educational institution, such as the University of Phoenix. It has done an analysis of its costs of teaching lower-level business courses (introductory accounting, business law, and so on) in its Indianapolis facilities, and has discovered that its marginal cost of enrolling an additional student in one lower-level business course is about $125. A further analysis indicates that students who are part-time students have a price elasticity of demand of these courses of -2.5, while students who are employed full-time have a price elasticity of demand of -1.8.

Question

Consider the situation faced by a for-profit educational institution, such as the University of Phoenix.  It has done an analysis of its costs of teaching lower-level business courses (introductory accounting, business law, and so on) in its Indianapolis facilities, and has discovered that its marginal cost of enrolling an additional student in one lower-level business course is about $125.  A further analysis indicates that students who are part-time students have a price elasticity of demand of these courses of -2.5, while students who are employed full-time have a price elasticity of demand of -1.8.

a.  Do you think that the conditions for price discrimination are met in this case?

b. Assuming that the conditions are met, what is the profit-maximizing tuition for full-time students?  For part-time workers?

c.  Again, assume that the conditions for price-discrimination are met.  Why might you decide not to price discriminate?  Or would you definitely price-discriminate?