You have 10 posters. You know 10 people such that 1 person is willing to pay...
You have 10 posters.
You know 10 people such that 1 person is willing to pay $9 for the poster, another $8, another $7, each successive person is willing to pay one dollar less all the way down to a 10th person willing to take the poster for free.
If you can only charge one price, what price do you charge?
Homework Answers
Answer
You will charge a price which will maximize revenue as the costs are not provided.
A firm's goal is to maximize profit but if there are no costs then it is revenue maximization.
total revenue =P*Q
at a price of $9 only 1 person is going to buy it and so on to at zero price all can buy.
TR(10)=10*0=0, TR(9)=1*9=9 and so on,
| Q | P | TR |
| 10 | 0 | 0 |
| 9 | 1 | 9 |
| 8 | 2 | 16 |
| 7 | 3 | 21 |
| 6 | 4 | 24 |
| 5 | 5 | 25 |
| 4 | 6 | 24 |
| 3 | 7 | 21 |
| 2 | 8 | 16 |
| 1 | 9 | 9 |
the total revenue is maximum at Q=5 units you will charge $5 if you can charge only one price
P=$5
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