(i) Draw and label the Marginal Revenue (MR) curve for the concert on Figure 3.
(j) Calculate the maximum revenue that can be earned from selling tickets for the concert.
Max Revenue output is where MR = 0
The monopolist can choose its output or its price but not both.
The Max Rev output is 30,000 therefore the price must be 150
150 x 30,000 = $4, 500, 000
The fixed costs for the concert have been calculated as $3 million, while it’s expected that there will be no variable costs.
(k) (i) Calculate the average fixed costs per ticket if all tickets are sold.
40,000 tickets are available
Understand that a monopolist can choose its price or quantity but not both.
If they want to sell all 40k tickets the monopoly will price them at $100 each,
But they will only make 40,000 x $100 = 4,000, 000.
Quantity of tickets = 40,000
FC = 3 million
AFC = Fixed Costs/Quantity sold
3m / 40k = 75
(i) Assuming that event organizers aim to maximize profit, calculate the profit that will be made from the concert.
Profit Maximization is where MR = MC
In this instance there are no Variable costs therefore no Marginal Costs
Therefore MC = 0
Total Revenue (P x Q) = 30,000 x $50 = 4,500,000
Total Costs = FC = 3,000, 000
Profit = TR – TC
1,500,000 = 4,500,000 – 3, 000,000
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