Find total revenue for quantity equal

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Reference no: EM131341696

Question One:

The Wise Economists, a top rock band, have just finished recording their latest music album. Their record company's marketing department have determined that the demand for downloads for the album is as follows:

Price

No. of downloads

Total Revenue

Total Cost

Total Profit

Marginal Revenue

Marginal Cost

24

10,000

240,000

50,000

190,000

 

 

22

20,000

440,000

100,000

340,000

20

5

20

30,000

600,000

150,000

450,000

16

5

18

40,000

720,000

200,000

520,000

12

5

16

50,000

800,000

250,000

550,000

8

5

14

60,000

840,000

300,000

540,000

4

5

The company can produce the album with no fixed cost and a variable cost of €5 per download:

a. Find total revenue for quantity equal to 10,000, 20,000 and so on. What is the marginal revenue for each 10,000 increase in the quantity sold?

b. What quantity of downloads would maximise profit? What would the price and profit be?

Profit is maximized at quantity 50,000 and price of 16. Profit=550,000

c. If you were the Wise Economists' agent, what recording fee would you advise them to demand from the record company and why?

Reference no: EM131341696

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