1 down on our luck studio has spent 100 million producing

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1. Down on our Luck Studio has spent $100 million producing an awful film, A Depressing Story about a Miserable Person. If the studio releases the film, the most cost-effective marketing plan would cost an additional $5 million, bringing the total amount spent to $105 million.  Box office sales under this plan are predicted to be $12 million, which would be split evenly between the theaters and the studio.  Additional studio revenue from video and DVD sales would be about $2 million.  Should the studio release the film?  If no, briefly explain why not.  If yes, explain how it could make sense to release a film that cost $105 million but earns only $12 million.

3. The following data are price/quantity/cost combinations for Titan Industry's mainframe computer division: 

Quantity       Price per unit          Total Cost of Production

0           Above $225,000           $200,000

1           $225,000          $250,000

2           $175,000          $275,000

3           $150,000           $325,000     

4           $125,000          $400,000                   

5           $90,000             $500,000

a. What is the marginal revenue if output rises from 2 to 3 units?

b. What quantity should Titan produce to maximize total revenue? Total profit?

c. What is Titan's fixed cost? How do Titan's marginal costs behave as output increases?

Reference no: EM13376064

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