Assume a firm sells an album for $25 per copy. The firm must pay $5 in...
Assume a firm sells an album for $25 per copy. The firm must pay $5 in royalties and $9 in production costs for each album. If 50 copies are sold, how much profit (value capture) was the firm able to make?
Homework Answers
Total profit (value capture) = Revenue - Total cost = Units sold x (Unit price - Royalty per unit - Production cost per unit)
= 50 x $(25 - 5 - 9)
= 50 x $11
= $550
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