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In order to earn additional income you have decided to publish an online subscription based magazine. Customers pay a monthly subscription fee and in exchange,
In order to earn additional income you have decided to publish an online subscription based magazine. Customers pay a monthly subscription fee and in exchange, they receive a monthly magazine that is sent to their inbox. As you own the copyright to the published material, you have an exclusive production right over the magazine and therefore a monopoly. You believe demand for the magazine is given by the following equation: Q=800 - 50F Where: Q represents demand (measured in subscriptions) and P represents the price in dollars {$). Based on the equation. you have constructed the following table: Demand 10C! 20C! 300 400 6 500 4 600 In order to publish the online magazine you have to pay xed costs of $2500 per month which includes web hosting fees. licensing, etc. Since subscribers receive the magazine via email which costs nothing to send. the cost of 'producing' additional copies is zero. Therefore, your total variable cost (TVC) can be represented by the following equation: TVC = 0Q l[For PartsA to C. enter your response as a whole number, i.e. no decimals and ignore any 55 signs. include a minus sign if necessary} A) What is your prot maximising price? At this point, how many subscribers would you have? The price is $ 8 per subscription There would be 40'0 subscriptions What is the maximum prot you could earn? What is the maximum prot you could earn? Prot is $ 700 per month One day you get a phone call from Slick Samantha who claims to be an online marketing genius. Through a series of questionable search algorithm optimisations. she claims to be able to increase your subscriptions by 50%. However. she would charge a monthly fee of $2000 to achieve this. B) Assuming Slick Samantha is successful. what is your prot maximising price? At this point, how many subscribers would you have? The price is $ per subscription There would be subscriptions What is the maximum prot you could earn? Prot is $ per month 0 You tell Samantha that $2000 per month is too expensive. She then offers an alternatively pricing model in which she would waive the monthly fee but instead charge a 'commission' of $4 per subscriber l[Note that the commission would apply to all subscribers not just the additional subscribers Samatha brings). C] If you accept this new pricing model, what is your prot maximising price? At this point, how many subscribers would you have? The price is $ per subscription There would be subscriptions What is the maximum prot you could earn? Prot is $ per month In summary, you are faced with three options: Option A: No marketing Option B: Marketing with [at $2000 monthly fee Option C: Marketing with commission of $4 per customer D) Which option would you prefer? (Type either 'A', 'B' or 'C'}
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