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Problem 2: Location Choice. Dallas currently has an NBA team (the Mavericks). Demand for Mavericks games in Dallas is given by: PD(QD) = 160 2QD

Problem 2: Location Choice. Dallas currently has an NBA team (the Mavericks). Demand for Mavericks games in Dallas is given by:

PD(QD) = 160 2QD Austin does not currently have an NBA team, but they would like to attract the Mavericks.

Demand for Mavericks games in Austin is given by: PA(QA) = 180 2QA

The marginal cost of production in both cities is constant at MC = 40.

1. Suppose first that no subsidies (i.e., bids) are allowed. a) Calculate the profits earned by the Mavericks in Dallas.

b) Calculate the profits earned by the Mavericks in Austin.

c) Will the team move to Austin?

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