Question

A firm that sells​ e-books - books in digital form downloadable from the Internet​ - sells all​ e-books relating to​ do-it-yourself topics​ (home plumbing,​ gardening, and so​ on) at the same price. At​ present, the company can earn a maximum annual profit of ​$35,000 when it sells 15,000 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 $140,000 per year developing new editions of the​ e-books. The company has determined that it would earn zero economic profits if price were equal to average total​ cost, and in this case it could sell 30,000 copies. Under marginal cost​ pricing, it could sell 110,000 copies.

In the short​ run, to the nearest​ cent, what is the​ profit-maximizing price of​ e-books relating to​ do-it-yourself topics?

At the profit-maximizing quantity, to the nearest cent, what is the average total cost of producing e-books?

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Answer 1

Gim annual profio $35000 Sells Copies (6) - 15,000 The firm incurs 45-cero a TR = Price x Quanity PX 15000 To = Fc TVC TC = 149000 + 0.45X 15000 = 140,000 + 6750 TC = 6 =146750 profil TR-TC 2 PX15000 — 146750 35000 5000 35000 +146.750 = Px15000 I SUDOP = 181750 P=181750/1 (P= 12-1166 The ATC i Hypo-tentsid The ATCH AIC TOATC = T/O = 146750/1000 - 9.78 ATC average total coll of producing €9.78