Question 2

We return to the Stanford Stadium pricing problem, with 60,000 seating capacity and demand curves for general public and students are given by dg (pg)= (120,000 -3,000pg)+ ,ds (ps) = (20,000 - 1,250ps )+ . Suppose that an earthquake damages Stanford Stadium so that only 53,000 seats are available for the Big Game.

a) What is the optimal single price to charge and the corresponding total revenue?

b) What are the optimal separate prices to charge for students and the general public and the corresponding total revenue?

c) What is the "opportunity cost" of having the capacity of 53,000 as opposed to 60,000 in both cases (charging a single price and seperate prices)