4 Now suppose the city in which the university is located imposes a $10,000 annual license fee on all suppliers of sporting events, including the University How does this affect the price of tickets? Suppose the team increases its spending for scholarships for its athletes How will this affect ticket prices, assuming that it continues to maximize profit? Now suppose that the city imposes a tax of $10 per ticket sold How would this affect the price charged by the team? A monopoly firm faces a demand curve given by the following equation: P = $500 − 10Q, where Q equals quantity sold per day Its marginal cost curve is MC = $100 per day Assume that the firm faces no fixed cost How much will the firm produce? How much will it charge? Can you determine its profit per day? (Hint: you can; state how much it is.) Suppose a tax of $1,000 per day is imposed on the firm How will this affect its price? How would the $1,000 per day tax its output per day? How would the $1,000 per day tax affect its profit per day? Now suppose a tax of $100 per unit is imposed How will this affect the firm’s price? How would a $100 per unit tax affect the firm’s profit maximizing output per day? How would the $100 per unit tax affect the firms profit per day? Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 565