Question

A monopolistic pro sports franchise called the Montana Motorheads (who divide home games between the cities of Billings, Bozeman, and Butte) faces ticket demand that varies according to the equation Q = 12500-50P and earns marginal revenue according to the function MR 250 - 0.04Q, where Q is the number of tickets (arena seats) sold per unit of time and P is the price per ticket in dollars. The Motorheads incur marginal costs according to the function MC 100+0.01Q. 1. a. If the Montana Motorheads are profit maximizers, how many tickets will the franchise sell per unit of time? What price per ticket will the Motorheads charge? b. The Montana Motorheads incur total costs according to the function TC- 280,000 + 100Q 0.005Q2. If the Motorheads operate at the profit-maximization point, how much economic profit (or loss) will the franchise earn per unit of time? C. Calculate the vertical intercept of the demand function and the marginal revenue function, and demonstrate that they are equal. In light of the results from parts a and c, calculate the level of consumer surplus associated with the Motorheads. [Hint: Think about the area of a key triangle.l d. If Montana government officials awarded the Motorheads a subsidy of $45,000 per unit of time, would the Motorheads earn positive economic profit, break even, or earn economic losses? Explain. After this subsidy, would fans still want the Motorheads to stay in the state, or would they want them to move? Explain.

Answer 1

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