The (inverse) demand for tickets to a concert by Paolo Conte at the local theater is given by P = 120 1 200 Q The theater has negligible (zero) fixed costs, and can sell any number of tickets up to 25 000, at constant marginal cost MC = $5.

1) How many tickets should the theater sell if it wanted to maximize its revenue?

2) How many tickets should the theater sell if it wanted to maximize its profit?

3) Suppose now that the theater must pay a tax of $7 per ticket to the local authority. What is the profit- maximizing level of output?

4) Suppose that, in addition to the $7 tax, the theater must pay $20 000 in insurance, independently of howmany tickets it sells. What happens to the profit maximizing quantityQM, pricePMand profit M?