Question 1. Suppose Robert is a typical Arizona Wildcats fan, and his demand curve for UArizona...
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Question 1. Suppose Robert is a typical Arizona Wildcats fan, and his demand curve for UArizona football games is given by PD = 120-10G, where G is the number of homes games that Robert attends. Suppose the marginal cost of supplying tickets is $0. a. If UArizona must charge the same price for each home game, what price should they charge so that Robert will attend all 8 home games? How much revenue do they earn from Robert? What is Robert's consumer surplus? (Hint: It might help to draw a graph. Recall that consumer surplus is equal to the area above the price and below the demand curve, and that the area of a triangle is equal to ½ x base x height.) b. Suppose Robert is a season ticket holder, and all season ticket holders must pay a one-time personal seat license fee, in addition to the price for each ticket. What should UArizona charge Robert for his personal seat license? (Hint: This is an example of two-part pricing.) c. How much revenue would UArizona earn if instead they used perfect price discrimination on Robert? (Hint: UArizona would charge Robert a different price for each game exactly equal to his willingness to pay, and Robert would receive no consumer surplus.) Question 1. Suppose Robert is a typical Arizona Wildcats fan, and his demand curve for UArizona football games is given by PD = 120-10G, where G is the number of homes games that Robert attends. Suppose the marginal cost of supplying tickets is $0. a. If UArizona must charge the same price for each home game, what price should they charge so that Robert will attend all 8 home games? How much revenue do they earn from Robert? What is Robert's consumer surplus? (Hint: It might help to draw a graph. Recall that consumer surplus is equal to the area above the price and below the demand curve, and that the area of a triangle is equal to ½ x base x height.) b. Suppose Robert is a season ticket holder, and all season ticket holders must pay a one-time personal seat license fee, in addition to the price for each ticket. What should UArizona charge Robert for his personal seat license? (Hint: This is an example of two-part pricing.) c. How much revenue would UArizona earn if instead they used perfect price discrimination on Robert? (Hint: UArizona would charge Robert a different price for each game exactly equal to his willingness to pay, and Robert would receive no consumer surplus.)
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