Consider the Slappers, a hockey team that plays in an arena with 12,000 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 is Q = 12,000 - 1000P and the marginal revenue curve associated with this demand curve is MR = 12 - 0.002Q.
a. The owner’s objective is to maximize the profit per hockey game. He does this by deciding how many tickets to sell (how many seats to fill … some may be left empty). At the profit maximizing output level, how many tickets will be sold?
Always always always. Marginal cost=Marginal revenue. In this amazing arena where there are no marginal cost MC=0=MR.
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