Question
Suppose a local team Q from city G has a demand function given by Q = 20005P. Assume the usual marginal cost function for the
Suppose a local team Q from city G has a demand function given by Q = 20005P. Assume the usual marginal cost function for the team except that its home stadium has a maximum capacity of 2200.
a) How many tickets will the team sell and how much will the team charge per ticket if the team acts like a profit-maximizing monopoly? Use relevant calculations to support your answer.
b) Use a carefully labeled diagram to show the consumer surplus, producer surplus, and deadweight loss in this case.
c) Compute the size of the deadweight loss as a result of the team's monopoly status.
d) Now assume the monopolist team can perfectly price discriminate. What is the new consumer surplus? Briefly explain the intuition of your answer.
e) Suppose the team decides to implement a two-part pricing scheme. How much will the team be charging in each part?
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