Question
Ariana Grande has just finished recording her latest CD. Her record company's marketing department determines that the demand for the CD is as follows: Price
Ariana Grande has just finished recording her latest CD. Her record company's marketing department determines that the demand for the CD is as follows:
Price Number of CDs
$24 10,000
22 20,000
20 30,000
18 40,000
16 50,000
14 60,000
The company can produce the CD with no fixed cost and a variable cost of$5per CD.
a. Find total revenue for quantity equal to $10,000, $20,000, and so on. What is the marginal revenue for each$10,000increase in the quantity sold?
b. What quantity of CDs would maximize profit? What would the price be? What would the profit be?
c. If you were Ariana's agent, what recording fee would you advise her to demand from the record company? Why?
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