What single price will maximize profit

Reference no: EM131132994

Empty Seats. Consider the Slappers, a hockey team that plays in an arena with 8,000 seats. The only cost associated with staging a hockey game is a fixed cost of $6,000: The team incurs this cost regardless of how many people attend a game. The demand curve for hockey tickets has a slope of $0.001 per ticket ($1 divided by 1,000 tickets): Each $1 increase in price decreases the number of tickets sold by 1,000. For example, here are some combinations of price and quantity:

The owners objective is to maximize the profit per hockey game (total revenue minus the $6,000 fixed cost).

a. What single price will maximize profit?

b. If the owner picks the price that maximizes profit, how many seats in the arena will be empty? Why is it rational to leave some seats empty?

c. Suppose the owner could engage in price discrimination. Would you expect the number of filled seats to increase or decrease? Explain.

Reference no: EM131132994

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