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In: Economics

(20) A college football team is a monopoly in setting price for season tickets. Demand for...

  1. (20) A college football team is a monopoly in setting price for season tickets. Demand for season tickets is P = 25 – 0.005Q, where P is price of a season ticket and Q number of season tickets (one season ticket admits a person to all home games).   Marginal cost of supplying another season ticket is MC = 10 per seat. Use a graph to illustrate all answers. Explain your work.
  1. Find the profit-maximizing ticket price and quantity if the college acts as a single-price non-discriminating monopoly. Find/show the welfare cost associated with this price-output.
  2. The college wants season ticket buyers to buy a parking pass (covers all home games). The college assumes that each season ticket holder will also purchase one season parking pass. Based on your price-quantity answer from part (a), what should the college charge for a season parking pass? Explain.
  3. An Econ major at the college suggests a better pricing scheme (from the team’s perspective): Lower the season-ticket price but require season-ticket buyers to pay a membership fee to join the football “booster” club; parking is free for members. What should be the new profit-maximizing ticket price, quantity, and membership fee? Explain.
  4. Compare consumer surplus, profit, price, quantity, and welfare cost in your answer in part c to part a. You do not need to calculate but using your graph may help illustrate your answer.

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Expert Solution

Rahul Sunny answered 2 years ago
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