## Info

1 Each ticket purchased through ticket centers, over the telephone, or on Ticketmaster Online is subject to a per ticket convenience charge. Telephone and online orders require use of a major credit card.

1 Each ticket purchased through ticket centers, over the telephone, or on Ticketmaster Online is subject to a per ticket convenience charge. Telephone and online orders require use of a major credit card.

2 Orders processed over the telephone or on Ticketmaster Online are also subject to a per order handling charge. With standard mail delivery, tickets will be received at least 48 hours prior to the event (no additional charge). UPS delivery by 5:00 p.m. in 2 business days (\$19.50), or by noon on Sat., if order placed by Wed. prior (\$25.00).

Source: Web survey by the author, December 14, 2001 (http://www.ticketmaster.com).

See: Julia Angwin, "Ticketmaster's Online Resell System to Compete with Scalpers and eBay," The Wall Street Journal Online, April 5, 2002 (http://online.wsj.com).

profit-maximizing activity level for the Hair Stylist, Ltd., a hairstyling salon in College Park, Maryland. Given the large number of competitors, the fact that stylists routinely tailor services to meet customer needs, and the lack of entry barriers, it is reasonable to assume that the market is perfectly competitive and that the average \$20 price equals marginal revenue, P = MR = \$20. Furthermore, assume that the firm's operating expenses are typical of the 100 firms in the local market and can be expressed by the following total and marginal cost functions:

where TC is total cost per month including capital costs, MC is marginal cost, and Q is the number of hairstylings provided.

The optimal price/output combination can be determined by setting marginal revenue equal to marginal cost and solving for Q:

Q = 750 hairstylings per month

At this output level, maximum economic profits are n = TR - TC

= \$20Q - \$5,625 - \$5Q - \$0.01Q2 = \$20(750) - \$5,625 - \$5(750) - \$0.01(7502) = \$0

The Q = 750 activity level results in zero economic profits. This means that the Hair Stylist is just able to obtain a normal or risk-adjusted rate of return on investment because capital costs are already included in the cost function. The Q = 750 output level is also the point of minimum average production costs (AC = MC = \$20). Finally, with 100 identical firms in the industry, industry output totals 75,000 hairstylings per month.