Question

Scenario 3 The Chicago Bulls are hosting the 2020 NBA All Star Game and face ticket demand of P = 1600 - .040. Capacity of their arena is 23,500. MC =0 until capacity is reached. 10. Refer to Scenario 3. What is the profit-maximizing price of tickets for the team? a. $800.00 b. $810.16 c. $1620.32 d. $945.45 Refer to Scenario 3. Suppose the team was more interested in selling out the game than profit maximizing. What price per ticket would it charge to sell out the game? a. $0 (the perfectly competitive price) b. $810.16 c. $800 d. $660

Answer 1

10.

Correct Answer:

A

Working note:

P = 1600 - .04Q ---------- (1)

Multiplying equation 1 with Q and then differentiation w.r.t. Q, gives MR.

MR = 1600 - .08Q

For profit maximization,

MR = MC

1600 - .08Q = 0

Q = 1600/.08

Q = 20000 seats

P = 1600 - .04*20000

P = $800

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11.

Correct Answer:

D

Working note:

Maximum ticket to be sold is $23500

So,

Price = 1600 - .04*23500

Price = $660