Question

ICALI IUDICI ZJ-TU Question Help Afirm that sells e-books - books in digital form downloadable from the Internet solls all e-books relating to do-it-yourself topics (home plumbing, gardening, and so on) at the same price. At present, the company can eam a maximum annual profit of $30,000 when it sells 40,000 copies within a year's time. The firm incurs a 45-cent expense each time a consumer downloads a copy, but the company must spend $100,000 per year developing new editions of the e-books. The company has determined that it would eam zoro economic profits if price were equal to average total cost, and in this case it could sell 25,000 copies. Under marginal cost pricing.it could sell 105,000 copies In the short run, to the nearest cent, what is the profit-maximizing price of e-books relating to do-it-yourself topics?

Answer 1

The maximum that the firm can earn is $30,000 at a quantity of 40,000 (2) Fixed cost FC = $100,000 Variable cost vc=$0.45 per book Total Revenue TR = .P XQ. = P x 40,000 11 Cost TC = FC + VC XQ = 100,000 + (0.45x40,000) = $118,000 Perofit = TR- TE 30,000 = 40.000 P- & P = 3.7 =) 118,000.

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