Scenario 4 (length: as needed) You are in charge of setting the optimal price fo

Question

Scenario 4 (length: as needed) You are in charge of setting the optimal price for tickets for a local hockey team. The demand schedule for hockey tickets is below: Price Quantity $10 6,000 5,750 5,200 4,900 4,500 4,000 18 1. What price maximizes the revenue from tickets? (Note, since marginal costs are assumed to be zero, this also maximizes profits) 2. Each spectator also spends money parking and on concessions. The team owns both the nearby lots and the concession stands at the arena. The team has estimated that concession profits increase by $s per person, and for every four spectators, one parking permit that is priced at $10 is purchased. With these new sources of revenue, what is the optimal ticket price?

Explanation / Answer

Ans:

1) price that maximizes revenue is $15.

Calculation of revenue at each price.

Revenue is maximum when the ticket price is $15.Hence the price that maximizes revenue is $15.

2) The optimal ticket price is $13.

Calculation of total revenue at each price.

Revenue is maximum when the ticket price is $13.Hence the optimal ticket price is $13.

Price Quantity Revenue = price * quantity $10 6000 $60,000 $11 5900 $64,900 $12 5750 $69000 $13 5500 $71500 $14 5200 $72800 $15 4900 $73500 $16 4500 $72,000 $17 4000 $68,000 $18 3500 $63,000

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