Examples:

1. Use the concepts of accounting and economic profit to explain why a team making $38m in profit would relocate to a city where it could make $52m in profit. Be sure to calculate the exact accounting and economic profit of the team before the move. Then explain what each number means. Let's assume explicit costs are $22m. The total revenue is $60m. The difference between total revenue and explicit costs is accounting profit. Before moving, the team's accounting profit was $38m ($60m-$22m=3%$38m) Economic Profit comprises explicit and hidden costs. If the implicit costs are $5m, the economic profit of the team before the move is $33m. We deduct explicit costs and implicit Costs from total revenue to compute economic profit before the shift. ($60- $22-5=$33m). Ifrelocating to a new city increases accounting profit to $52 million, that means the total revenue will increase and explicit costs will decrease, making the economic profit in the new city would be higher than before the move. The current city's economic profit is smaller than the new city's when considering the potential earnings lost by not migrating. 2. A stadium that operates at 82% of its capacity is considering adding 200 seats for future expansion needs. Immediately after the seats are added, how will ticket prices be affected? lllustrate your reasoning on a graph. Demand curves represent the relationship between ticket prices and the quantity of seats demanded. This can be seen as negatively sloping from left to right. Due to the stadiums fixed capacity, the supply curve S1 can be seen vertical line. After the expansion, supply shifts to the right to represent the additional 200 seating and can be seen as S2. Because the stadium is currently operating at 82% capacity, we can infer the stadium is experiencing excess demand for which it cannot accommodate. This can be seen by the gap between the demand curve and S1. At S2, a greater number of seats are being provided due to the 200 seat increase. Because the demand curve remains unchanged there will be no initial effect on ticket prices. The additional seating can help satisfy excess demand while increasing revenue. In the long run, expansion can lead to a more balanced supply-demand equilibrium, thus leading to increases in ticket prices. However, initially ticket prices won't be affected