A baseball teams attendance depends on the number of games it wins per season and on the price of its tickets. The demand function it faces is Q = N(20 – p), where Q is the number of tickets (in hundred thousands) sold per year, p is the price per ticket, and N is the fraction of its games that the team wins. The team can increase the number of games it wins by hiring better players. If the team spends C million dollars on players, it will win 0.7 – of its games. Over the relevant range, the marginal cost of selling an extra ticket is zero. (a) Write an expression for the firms profits as a function of ticket price and expenditure on players. (b) Find the ticket price that maximizes revenue. (c) Find the profit-maximizing expenditure on players and the profitmaximizing fraction of games to win.

A baseball teams attendance depends on the number of games it wins per season and on the price of its tickets. The demand function it faces is Q = N(20 – p), where Q is the number of tickets (in hundred thousands) sold per year, p is the price per ticket, and N is the fraction of its games that the team wins. The team can increase the number of games it wins by hiring better players. If the team spends C million dollars on players, it will win 0.7 – of its games. Over the relevant range, the marginal cost of selling an extra ticket is zero. (a) Write an expression for the firms profits as a function of ticket price and expenditure on players. (b) Find the ticket price that maximizes revenue. (c) Find the profit-maximizing expenditure on players and the profitmaximizing fraction of games to win.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter5: Price Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 18SQ

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