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A football club is the only one in its region and is therefore able to behave like a monopolist. It sells tickets to Adults (a) and Juniors (j), whose demand curves are given by:

Pa = 200 − Qa
Pj = 160 − Qj

Additionally, the club’s total costs are given by = 20Qi

The club hires an economist to consider its pricing strategy and receives the advice that it should charge different prices to each type of supporter. Find the prices it sets in both markets, the sales (output) in each and its overall level of profit and illustrate profit maximising outputs and prices of each consumer type on a graph (one graph for each type of consumer). Calculate consumer surplus in this case.

Respuesta :

The consumer surplus based on the information given in this scenario will be 6400.

How to calculate the consumer surplus?

From the information given, the total cost is 20q. Therefore, the marginal cost is 20.

The market demand will be:

q = 360 - 2p

P = 180 - 0.5q

MR = 180 - q

At equilibrium, MR = MC.

180 - q = 20

q = 160

Therefore, the price will be:

P = 180 - 0.5q

p = 180 - 0.5(160)

= 180 - 80

= 100.

Consumer surplus will be:

= 1/2 × 180 - 100 × 160

= 1/2 × 80 × 160

= 40 × 160

= 6400

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