League Competition: Suppose the demand for soccer teams in the US is given by: P(Q) =...

League Competition: Suppose the demand for soccer teams in the US is given by: P(Q) = 320−10Q where Q is the total number of soccer teams and Pi s the marginal willingness to pay for the Qth team (in millions). The cost to start a new team is c= 20

Two Leagues: First, suppose are two leagues (Major League Soccer and the National Soccer League) that are choosing how many teams to have, so that Q=qm+qn.

a Find the equilibrium number of teams for the MLS.

b Find the equilibrium number of teams for the NSL.

c What are profits for the MLS?

d What are profits for the NSL?

e What is consumer surplus?

Merger: Now assume the leagues merge to form one league (Premier USA). After the merger demand increases to:P(Q) = 360−10Q

a What is total surplus (consumer surplus and profit)?

b Is consumer surplus more or less than the pre-merger surplus?

Expert Solution

Rahul Sunny answered 1 hour ago

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