Connect Access Card for Managerial Econnomics
9th Edition
ISBN: 9781259354335
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Concept explainers
Question
Chapter CS, Problem 1CBE
To determine
To explain: The revenue will increase or not.
Expert Solution & Answer
Answer to Problem 1CBE
Yes the revenue will be increased.
Explanation of Solution
Consider the profit formula,
Where,
Now, consider the table shown below,
| Price | No. of Subscribers | Cost of license fees | Divisional, general and adm costs | TR | TC | Profit |
| 5 | 29.974 | 134.883 | 14.5 | 149.87 | 149.383 | 0.487 |
| 6.5 | 22.657 | 101.956 | 14.5 | 147.2705 | 116.456 | 30.8145 |
| 7 | 19.897 | 89.537 | 14.5 | 139.279 | 104.037 | 35.242 |
| 7.5 | 16.671 | 75.017 | 14.5 | 125.0325 | 89.517 | 35.5155 |
| 8 | 20.492 | 92.213 | 14.5 | 163.936 | 106.713 | 57.223 |
| 8.5 | 20 | 89.998 | 14.5 | 170 | 104.498 | 65.502 |
| 9 | 19.76 | 88.92 | 14.5 | 177.84 | 103.42 | 74.42 |
| 9.5 | 17.123 | 77.053 | 14.5 | 162.6685 | 91.553 | 71.1155 |
| 10 | 12.643 | 56.896 | 14.5 | 126.43 | 71.396 | 55.034 |
| 10.5 | 12.785 | 57.532 | 14.5 | 134.2425 | 72.032 | 62.2105 |
| 11 | 12.216 | 54.974 | 14.5 | 134.376 | 69.474 | 64.902 |
| 11.5 | 13.246 | 59.608 | 14.5 | 152.329 | 74.108 | 78.221 |
| 12 | 8.637 | 38.867 | 14.5 | 103.644 | 53.367 | 50.277 |
| 12.5 | 10.595 | 47.78 | 14.5 | 132.4375 | 62.28 | 70.1575 |
| 14 | 2.739 | 12.326 | 14.5 | 38.346 | 26.826 | 11.52 |
| 14.5 | 5.291 | 23.809 | 14.5 | 76.7195 | 38.309 | 38.4105 |
| 15 | 3.051 | 13.73 | 14.5 | 45.765 | 28.23 | 17.535 |
Figure-1
Consider figure-1, the profit is maximized at Price of
Economics Concept Introduction
The profit is obtained by subtracting the product of price and number of subscribers with the total cost.
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