1. Suppose the local-market demand a AAA minor-league baseball team faces for an individual game is = 200 − 1000P. The team has a stadium with a 16,000-seat capacity. Q is the number to tickets sold at price P. For the sake of simplification, there is no difference, from a fan’s perspective, in where they sit, assume the marginal cost of adding an additional fan to the stadium is zero, and when the team maximizes its total revenue, it also maximizes its profit. Show your work.
a. What would be the profit-maximizing number of tickets sold for a single game? What is the team total gate revenue?
b. The league has a rule that a game cannot appear on local TV without the game selling out all the stadium seats. What would be the team’s minimum amount the team needs to get from the TV broadcast to make it profitable for the team to sell-out the stadium?
c. After string of victories and games appearing on local TV, what would you expect to happen to the demand for attending the team’s games? What about the demand for people to watch it on TV? How would this impact the team’s two revenue sources? Explain.