In many cities, the price of summer pops concerts has risen. In Charlotte, North Carolina, and Columbus, Ohio, for example, concerts that were once free now cost $5. If there are only fixed costs and no variable costs nor marginal costs in an orchestra concert, what is the efficient price? Explain the reason why some people will find the efficient price unfair.
What will be an ideal response?
If MC = 0, then the performances should be at a zero price, since P = MC is part of the criteria for efficiency. But then fixed costs will have to be paid from other sources, such as general taxes. Some believe that those who use the service should pay for it, so charging those most willing to pay appears fairer to them.
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