If a boxing fight is shown on pay-per-view television every Saturday at 4pm, the demand curve for each fight is given below. If viewing a fight were free to anyone who tuned in, total economic surplus would be ______.

Question

If a boxing fight is shown on pay-per-view television every Saturday at 4pm, the demand curve for each fight is given below.  If viewing a fight were free to anyone who tuned in, total economic surplus would be ______.

Quizplus · Accepted Answer

To find the total economic surplus from the free-to-air fights, we need to find the area under the demand curve for each fight up to the point where the marginal cost (which is zero in this case) intersects the demand curve. This is represented by the shaded area in the graph.

Since the demand curve intersects the x-axis at a price of $50, there are 50/5 = 10 fights in total.

The area under the demand curve up to a quantity of 10 is [(50-10)/2]*10 = $200 million.

Since the marginal cost is zero, the entire area represents economic surplus. Therefore, the total economic surplus from free-to-air fights is $200 million * 3.125 = $625 million.

If a Boxing Fight Is Shown on Pay-Per-View Television Every