Question

Use the following information to answer questions 1-4. You have achieved a dream job working for the Toledo Mud Hens. You estimate the demand for general admission tickets as follows. Price Quantity 15 5000 14 6000 13 7000 12 8000 11 9000 10 10000 The marginal cost of selling a ticket is $2. Other fixed costs per game equal $5000. Finally, the seating capacity is 9000.

Answer 1

Price, P	Quantity, Q	TR=P*Q	MR=Change in TR/Change in Q
15	5000	75000
14	6000	84000	9
13	7000	91000	7
12	8000	96000	5
11	9000	99000	3
10	10000	100000	1

1)

A monopolist will decrease the price as long as Marginal revenue of additional sale is higher or equal to marginal cost.

In this case MR ($3) > MC ($2) at Q=9000

But MR ($1) < MC ($2) at Q=10000

So, monopolist will sell 9000 tickets at a price of $11 to maximize profit (Number of tickets sold is within the capacity)

So, correct option is

None of these

2)

Total Cost=TC=5000+2*Q=5000+2*9000=$23000

Correct option is

$23000

3)

Total Revenue=TR=P*Q=11*9000=$99000

Profit=TR-TC=99000-23000=$76000

Correct option is

76000

4)

Since optimal number of tickets sold is equal to capacity of Toledo Mud Hens. Increasing capacity will not affect the optimal price.

So, correct option is

11