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A minor league baseball team called the Lancaster JetHawks attracts many active-duty military personnel (stationed nearby) as well as civilians during the season, which runs
A minor league baseball team called the Lancaster JetHawks attracts many active-duty military personnel (stationed nearby) as well as civilians during the season, which runs from about mid-April through August. The JetHawks organization has estimated that, among soldiers, weekly demand for tickets to JetHawks home games varies according to the equation Q = 2200 - 200P, where Q is the quantity of tickets sold and P is the ticket price in dollars. Among civilians, weekly demand is given by the equation o= 2400 - 160P. The JetHawks organization earns marginal revenue from soldiers according to the equation MR = 11 - 0.01Q and from civilians according to the equation MR = 15 - 0.0125Q. The JetHawks incur marginal cost of $3 among all fans. The JetHawks would like to charge different ticket prices for soldiers and civilians. 1. How many tickets would the JetHawks sell to soldiers, to maximize profit? What price would the team charge soldiers? 2. How many tickets would the JetHawks sell to civilians, to maximize profit? What price would the team charge civilians? 3. Using the "algebraic formula" for elasticity, calculate price elasticity of demand at the profit-maximization point in the soldier market and the civilian market. 4. Whether selling tickets to soldiers or civilians, the JetHawks organization incurs total costs according to the equation TC = 1800 + 3Q. If the JetHawks succeed at price discrimination, how much economic profit (or loss) will the team earn selling tickets to soldiers? How much will it earn selling tickets to civilians? 5. Suppose the California League, in which the Lancaster JetHawks play, prohibits price discrimination in this way and forces the club to charge a single price to all fans. How many tickets would the JetHawks sell to civilians if they charged them the soldier price (part a)? Show that MR + MC in this situation. How many tickets would the JetHawks sell to soldiers if they charged them the civilian price (part b)? Show that MR * MC in this situation
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