Question

MC($ millions) MR (S millions) superstars first second third fourth fifth Sixth 256 296 seventh The data above pertain to a sports franchise and its annual employment of superstar player talent. Calculate the franchise's marginal revenue product of superstars for all seven hypothetical levels of employment Show the arithmetic details of these calculations. How many superstar players will this franchise employ, to maximize profit? Explain using marginal productivity theory Suppose this franchise funds its employment of superstars through ticket sales. Will this franchise have to engage in inelastic ticket pricing to afford to employ superstars? Explain

Answer 1

solution- a) The data in the above table shows detalls of $ posts franchise and its amual employment of superstar player talent. > Now we have to calamate MPRL coo) MRP. (Marginal devenus MPL MR MPRL /MRP. First 3x30590. Second 8x26 = 208. Third 14x22= 308. 19x18 = 342 23X14=322" Fourth Fifth Sixth Seventh 26X10 32600 28X 6 = 1680 6. MRP2 MPL X MR.

yers thout 6 we have to find, here how many supeostor players the franchise employs, for poogit massimization. SBut, here hising is optimized when MRPL >= MCL. o when L=6; then MRPL > MEL- But if L=7; MRPL will be less than MCL .. profit get maximized when franchise selects 'G'Rupeaftar players. © Here, we need to have a brief Idea about inelastic poicing Of ticket. → Demand for the ticket will be inelastic in nature. Hence, FOG K% increase in poice, these will be decreouse of Less than K% of Quantity demanded . may $o, of popce goes high, revenue gets increased. The Lesser, the value of MR, the value of price will also be less and demand is more chustic in nature. > $o, Poice should be increased to enhance more incomo from ticket purchaused