Suppose that Queen's University wishes to reduce the operating deficit of the sports

programs and increase student attendance at home football games. A new two-tier

pricing structure for football season tickets is being considered. A market survey

conducted for the University suggests different demand curves for season tickets for the

public versus students. Public demand for tickets is represented by the function: P

P

= 225

- 0.005 Q

P

. The marginal revenue curve would be MR

P

= 225 - 0.01Q

P

. The demand

function for students is expressed as P

S

= 125 - 0.00125Q

S

with a marginal revenue curve

of MR

S

= 125 - 0.0025Q

S

.

The budget of the football program covers fixed costs such as salaries, recruiting,

insurance and facility maintenance expenses. In addition, the program incurs variable

costs of $25 per season ticket holder. These include ticket handling, facility cleaning and

security costs. The resulting total cost function is TC = 1,500,000 + 25Q.

a)

What is the optimal season ticket price and quantity in the public market?

b)

What is the optimal season ticket price and quantity in the student market?

c)

What is the operating surplus (profit) when tickets are sold at different prices in

the public market and in the student market?

d)

Now suppose that under protest from the general public the University charges a

single price. Calculate the optimal single price and the resulting quantity sold.