Question

Scenario 15-6 The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: die-hard fans and casual fans. For a particular WeR2Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc. How much profit will the concert promoters earn if they engage in price discrimination?
a. $100,000
b. $125,000
c. $150,000
d. $175,000

Answer 1

Answer:

Profit = $125,000

Explanation:

We know,

Profit = Sales revenue - Expense

Given,

Sales revenue = Number of seats available × Ticket price per person

Sales revenue = (1,000 seats × $150) + (500 seats × $50)

Sales revenue = ($150,000 + $25,000)

Sales revenue = $175,000

Expense = $50,000

Putting the values to the formula, we will get

Profit = Sales revenue - Expense

Profit = $175,000 - $50,000

Profit = $125,000