The Local Baseball Team Owner Hires You to Help Maximize

question 42

Multiple Choice

The local baseball team owner hires you to help maximize the team's profits.You are told that costs are constant because enough help is always hired for a full stadium, so assume your task is to maximize revenues from ticket sales.Your advice to the owner should be to

• A) Set the ticket price in the inelastic region of the demand curve in order to increase revenues.
• B) Raise the price as high as possible until the number of tickets sold begins to fall.
• C) Set the price as low as possible to make sure the stadium is always full.
• D) Set the price of tickets at the unitary elasticity price.

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Definitions:

Shut Down

A short-term decision by a firm to cease operations because current operation is not covering variable costs.

Firm

An organization that produces goods or provides services, usually with the aim of making a profit.

Economic Profit

The difference between the total revenue generated by a business and the total costs, including both explicit and implicit costs.

Minimum Return

The lowest expected or required return on an investment over a specified period.