The diagram below depicts a professional sport franchise. a) Explain the shape of the marginal cost...
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The diagram below depicts a professional sport franchise. a) Explain the shape of the marginal cost function. b) Identify the profit maximizing ticket price. Does this team have empty seats at this price? If so, how many? c) If this team reduced the price from the current equilibrium would they sell more tickets? Explain with direct refence to the diagram. d) Can this team increase revenues by decreasing the price from the equilibrium? Explain with direct reference to the diagram. e) What does your answer to part d) tell you about the price elasticity of demand at prices below the equilibrium? Use the definition of price elasticity in terms of percent changes in your answer. 8 3 p ($ per ticket) MR MC 0 5 10 15 20 25 30 35 40 45 50 55 60 The diagram below depicts a professional sport franchise. a) Explain the shape of the marginal cost function. b) Identify the profit maximizing ticket price. Does this team have empty seats at this price? If so, how many? c) If this team reduced the price from the current equilibrium would they sell more tickets? Explain with direct refence to the diagram. d) Can this team increase revenues by decreasing the price from the equilibrium? Explain with direct reference to the diagram. e) What does your answer to part d) tell you about the price elasticity of demand at prices below the equilibrium? Use the definition of price elasticity in terms of percent changes in your answer. 8 3 p ($ per ticket) MR MC 0 5 10 15 20 25 30 35 40 45 50 55 60
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Answer rating: 100% (QA)
a Marginal Cost Function Shape The marginal cost MC function in the graph is a horizontal line This indicates that the cost of producing one more tick... View the full answer
Related Book For
Microeconomics
ISBN: 978-1464187025
2nd edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
Posted Date:
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