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.
-Refer to Scenario 15-6. How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $150 per ticket?

Question

Quizplus · Accepted Answer

The concert promoters can earn an additional $25,000 in profit by charging each customer their willingness to pay relative to charging a flat price of $150 per ticket. This is because the total revenue from charging each customer their willingness to pay is $175,000 (1,000 x $150 + 500 x $50), while the total revenue from charging a flat price of $150 per ticket is $150,000 (1,500 x $150). The additional profit is $25,000 ($175,000 - $150,000).

Scenario 15-6 The Concert Promoters of a Heavy-Metal Band, WeR2Loud, Know That