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.

3. Suppose that the consumer surplus in Dallas is actually 2000, but all other values remain the same.

a) If subsidies are banned, where would the team locate? b) If subsidies are allowed, would the team move to Austin?

c) If subsidies are allowed, how much is the winning subsidy? d) If subsidies are allowed, what is the profit plus subsidy for the team?

e) If subsidies are allowed, what is consumer surplus minus the subsidy?