It is my sport economics question. Max profit = (P+K)A-C The first-order conditi
ID: 1189139 • Letter: I
Question
It is my sport economics question.
Max profit = (P+K)A-C
The first-order condition is:
MR(ticket sales) + MR (concession sales) = MC (ticket sales)
MR^T + K = MC^T
Assume that gate receipts are a club's only source of revenue and that the demand function for tickets is given by Q= 5 - 0.5P. THe cost function is C = 2t, where t is the club's talent. Let k = 4. Find the optimal quantity and price for a club that considers complementary sources of revenue when setting its ticket price. What is the value of the firm's revenue? what is the value of the price elasticity of demand for tickets at the profit maximizing quantity?
What is the optimal quantity is?
Explain it plz.
Explanation / Answer
K= 4
MR +4 = MC
MC = 2
Q= 5-0.5P
P = 10-2Q
TR =PQ= 10Q-2Q2
MR = 10-4Q
This implies
10-4Q +4 = 2
12=4Q
Q = 3
P =10-2x3 = $4.
Revenue = PQ
Revenue =3x4 =12
Price elasticty is the coefficient of price in demand equation. The elasticty here is -0.5.
The optimal quantity is 3 units.
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