posted by mimi on .
Suppose that in 2008, you became president of a small nonprofit theater company. Your playhouse has 120 seats and a small stage. The actors have national reputations, and demand for tickets is enormous relative to the number of seats available; every performance is sold out months in advance. You are elected because you have demonstrated an ability to raise funds successfully. Describe some of the decisions that you must make in the short run. What might you consider to be your “fixed factor”? What alternative decisions might you be able to make in the long run? Explain.
You'd want to raise ticket prices --- at least to the point where all performances aren't sold out, and likely higher --- in order to maximize revenue. Virtually, all of your costs are fixed unless you have a rev share contract with the talent.