Question
Suppose that a team faces the following cost and demand functions, and there are no externalities in the market. Demand: P = 24 - Q
Suppose that a team faces the following cost and demand functions, and there are no externalities in the market.
Demand: P = 24 - Q
Total cost: TC = 2Q2 + 52
a. Identify the profit-maximizing level of output (attendance), and calculate the
team's profit or loss at that quantity.
b. Should the city subsidize the team? Explain.
c. How might the presence of externalities influence whether or not a subsidy is
economically justified?
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Managerial Economics and Organizational Architecture
Authors: James Brickley, Clifford W. Smith Jr., Jerold Zimmerman
6th edition
73523143, 73523149, 978-0073523149
