D Do omework: Problem Set - Chapter 8 0 of 3 pts ext Problem 2.1 to the in this

Question

D Do omework: Problem Set - Chapter 8 0 of 3 pts ext Problem 2.1 to the in this s have begun offering tickets for sale at hailf price through discount ticket outets. These half-price tickets are only available on the day of the show, on a HW Using the concept of marginal cost, explain why many of these productions have begun to offer these haif-orice sickets ice ticket prices range from less than $10 for a Sew of the smaler shows to over $200 for some of the major productions trst-come, first-served basis prostable

Explanation / Answer

Correct Answer:

Profitable

Near Zero

The idea of reduction in prices take place when the event management companies have recovered the fixed cost of the investment and prices are higher than the variable cost. In this situation the variable cost involved to serve each additional customer   becomes the marginal cost. To gain the positive economic profit, the firms sell the tickets at half of its prices (50% discounts) as the discounted prices are still higher than the marginal cost. With each additional sales, the firm gains more and the positive economic profit increases. To maximize the profit, it is done on the last day of the event and concert when the marginal cost is at the lowest level and firms can maximize the income by maximum sales of the ticket even at the 50% lower prices.

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