03 Jun Question 1. On Sunday, August 19, the Detroit Tigers and the New York Y
Question
1. On Sunday, August 19, the Detroit Tigers and the New York Yankees played baseball at Yankee
Stadium. Both teams were in pursuit of league championships. Tickets to the game were sold out, and
many more fans would have attended if additional tickets had been available. On that same day, the
Cleveland Indians and the Tampa Bay Rays played leach other and sold tickets to only 22,500 people
in Tampa. The Rays stadium, Tropicana Field, holds 43,772. Yankee Stadium holds 57,478. Assume
for simplicity that tickets to all regular-season games are priced at $40.
(a) Draw supply and demand curves for the tickets to each of the two games. (Hint: Supply is fixed.
It does not change with price.) Draw one graph for each game.
(b) Is there a pricing policy that would have filled the ballpark for the Tampa game? If the Rays
adopted such a strategy, would it bring in more or less revenue? Explain.
(c) The price system was not allowed to work to ration the New York tickets when they were initially
sold to public. How do you know? How do you suppose the tickets were rationed?
2. True/False: State whether you think the following statements are True or False, and explain why the
statements are True or False.
(a) the price of a good rises, causing the demand for another good to fall. Therefore, the two goods
are substitutes.
(b) During 2009, incomes fell sharply for many Americans. This change would likely lead to a decrease
in the prices of both normal and inferior goods.
(c) Two normal goods can not be substitutes for each other.
(d) If demand increases and supply increases at the same time, price will clearly rise.
3. The City of Oklahoma City is debating implementing one of two possible solutions for the rising illegal
drug problem. The stated objective the optimal policy is to decrease the amount of money that buyers
spend on the drugs (i.e. to decrease the Total Expenditures on illegal drugs)1. Evaluate the two
proposed policies:
(a) War on Drugs: The War on Drugs campaign attacks the market by reducing the supply of drugs
on the streets. Using a supply/demand diagram, illustrate and explain the impact that this policy
would have on equilibrium price and quantity.
(b) Just Say No: The Just Say No campaign educates people on the effects of drugs. Using a supply/demand diagram, illustrate and explain the impact that this policy would have on equilibrium
price and quantity.
(c) Which campaign achieves the goal of reducing the amount that buyer spend on illegal drugs.
Support your answer with evidence from parts (a) and (b).
1Recall
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