Use the following information for questions 1 through 5. As an intern, you estim
ID: 1156991 • Letter: U
Question
Use the following information for questions 1 through 5. As an intern, you estimated the demand for attendance at women’s soccer games. The athletic director liked your work and hired you as an assistant. She asks you to plan ticketing strategy for the upcoming season. Your demand estimate is given below:
Price Tickets
25 250
20 500
15 750
10 1000
5 1250
The marginal cost of selling a ticket is $15. The capacity is 1000.
1. What is the profit maximizing price?
2. How many tickets will be sold at that price?
3. What is the profit at the profit maximizing price?
4. Suppose the East stands collapse, and the capacity is reduced to 250 seats. What price do you recommend?
5. In order to repair the damage, 750 new seats are built (so the total number of seats is now 1000). What price would you recommend?
Explanation / Answer
Price
Tickets
MC
TC
TR
Profit
25
250
15
3750
6250
2500
20
500
15
7500
10000
2500
15
750
15
11250
11250
0
10
1000
15
15000
10000
-5000
5
1250
15
18750
6250
-12500
1. Maximising price = $20
2. 500 tickets
3. $2500
4. $25
5. $25 as the profit is maximum at this price for 1000 seats
Price
Tickets
MC
TC
TR
Profit
25
1000
15
15000
25000
10000
20
1000
15
15000
20000
5000
15
1000
15
15000
15000
0
10
1000
15
15000
10000
-5000
5
1000
15
15000
5000
-10000
Price
Tickets
MC
TC
TR
Profit
25
250
15
3750
6250
2500
20
500
15
7500
10000
2500
15
750
15
11250
11250
0
10
1000
15
15000
10000
-5000
5
1250
15
18750
6250
-12500