just need a direction. You’re the manager for a college football team. Assume yo
ID: 1206808 • Letter: J
Question
just need a direction.
You’re the manager for a college football team. Assume you own the stadium and the variable cost per attendant is $0. You’ve been told by your in-house economist that you should set the price of tickets at $50 to maximize profit (at current, you set one price). Your football coach is really pushing to sell out the game. 1. Under what condition will profit maximization also result in a sold out game? Under what condition will profit maximization not result in a sold out game? (Solving mathematically and drawing a figure would be helpful). 2. If the game is not sold out at the profit maximizing price, what strategy could the team employ that would result in a lower deadweight loss?
Explanation / Answer
1. if the total tickets are able to sell at the given price the firm will maximize its profits. of course there is no variable cost, so every penny add to the total sales will be increase total return. so, irrespective of ticket price all the revenues through ticket sales will helps to increase total profits to the team.
2. if the game is not sold the tickets at the profit maximizing stage, then it is better to sold atleast to cover the fixed cost of the game. below the equilibrium point is the dead weight loss to the organizer.
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