The ESPL (E-Sports Professional League) is a new business venture that is being loosely organized by...

The ESPL (E-Sports Professional League) is a new business venture that is being loosely organized by over 60 potential teams of players. The plan is to operate weekly competitions in smaller venues that can seat up to 500 spectators. New teams can enter and exit the league at very low cost. You have been hired to act as an economic consultant to the new league.

a. Based on market research, you have estimated that the industry demand for tickets every week is given by the equation P = 100 – 0.001Q, where P is the league standard ticket price and Q is the total number of tickets sold in the league each week. You have also estimated, based on estimates of team costs, that the weekly industry ticket supply is given by the equation P = 2 + 0.0005Q. Based on your research, compute the league standard ticket price and quantity of tickets sold each week.

b. One particular team, Team Green, faces weekly total costs given by the equation C = 1000 + Q + 0.05Q2. What will be the profit-maximizing number of tickets for this team to sell each week? Show your work. Compute the weekly profit. What is the level of fixed costs?

c. Due to positive profits, new teams enter the league, forcing down the league standard ticket price. How low can the ticket price go for Team Green for it to remain in operation? Show your work.

Expert Solution

Rahul Sunny answered 5 months ago

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