the university athletic department has been asked to host a professional basketb
ID: 2344643 • Letter: T
Question
the university athletic department has been asked to host a professional basketball game. the only other event scheduled that evening is a fencing match that would not add additional costs or generate any revenue. the fencing match could be held at a local high school for $200. the athletic director estimates that the basketball game will require 20 hours of labor to prepare for the basket ball game. clean up depends on the number of attendants. the labor would be hired specifically for the basketball game would be 8$ an hour. the time of clean up would be 2 minutes per attendant. all other costs would be covered by the professional basketball team. what is the variable costs of having one more spectator. what is the opportunity costs of allowig the professional basketball team to use the sports center if 10,000 spectators were expected. what is the opportuity cost of allowing the the professional basketball team to use the sports center if 12,000 spectators are expected?Explanation / Answer
time for clean-up = 2 minutes per spectator A) Average variable cost of having one more spectator = 8/60 * 2 = $ 0.27 Average marginal cost of having one more spectator will also be 0.27 B) Cost of allowing the professional basketball team to use the sports center if 10,000 spectators are expected = Total Fixed cost + Total Variable cost = 200+ 500 + 160 + (10,000*2/60*8) = $ 3526.67 C) The opportunity cost of allowing the basketball game to use the sports center will be the amount to be paid as rental fee of high school gym to hold fencing match plus the excess utilities if the basketball game is held at the sports center Thus opportunity costs = $ 200 + $ 500 = $ 700 D) Average cost per spectator if 10,000 spectators are expected = $ 3,526.67/10,000 = $ 0.3526 Average cost per spectator if 12,000 spectators are expected =$ ( 200+500+160+12,000*2/60*8)/12,000
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