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Suppose the demand for Cardinal's World Series tickets is Qd = 48, 061 ? 2.4P (for the purposes of this problem, we will suppose that fans do not care where they sit). The Cardinals play at Busch Stadium, which has a seating capacity of 46,861. The marginal cost of providing a seat to a fan is $0 for seats 0 through 46,861. At Qs = 46, 861, the marginal cost curve becomes a vertical line.

(a) What would be the deadwieght loss associated with a $20 tax on Cardinal's World Series tickets?

(b) Define the Ramsey rule.

(c) Based on the Ramsey rule, would this be a good product to tax?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9473610

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