Question

1. The table below displays Andy Reid and Bill Belichick's willingness to pay for tickets to watch the Super Bowl, Pro Bowl, and their combined willingness to pay for both tickets. If the NFL sells each ticket individually, the maximum profit the NFL can make from selling the two tickets is dollars. (Assume the marginal costs of production are zero). However, if the NFL were to bundle the two tickets into one package, the bundle would be priced at dollars resulting in a total profit of dollars. (3 pts.) Andy Bill Super Bowl Pro Bowl S4 $10 Ticket Package SH 2. (Figure: Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets market A and market B—the price the monopolist should charge in market A to maximize profits is dollars while a price of_ dollars should be set in market B. Additionally, profit the monopolist earns by setting these prices in the segmented markets is dollars. Now assume arbitrage begins to become extensive within these two markets. The monopolist will then set one price that lies between dollars and dollars. (5 pts.) Market A Market B 10%...... MC = AC 5 -MC=AC 60 80 100 MR 50 100 150 MR 0 Page 1

Answer 1

Q1)

Separate selling

For super Bowl, charge P = 6,

( total π = 6*2 = 12, as both will buy)

For pro Bowl , P = 10

( total π = 10*1 = 10, only bill will buy, )

Total π = 10+12 = $  22

.

for package, optimal price = 15, as both will buy, total π = 2*15= 30

If P = 16, π = 16*1= 16,

So priced at $ 15

π = 30$

Q2) market A

At eqm in monopoly, MR = MC

So at Q = 60, PA* = 10

Similarly, in market B

Q* = 50, PB* = 15

.

Profit = (10-6) *60 + (15-5) *50

= 240 + 500

= 740

single price

Then price lies between 10$ & 15$