Question
KW has produced a new hit song, Lovin' KK. Digital copies can be produced at marginal cost of zero, and he has no fixed costs.
KW has produced a new hit song, "Lovin' KK." Digital copies can be produced at marginal cost of zero, and he has no fixed costs. The market demand for KW's song is given by QD= 8 - P, where quantity is measured in millions of copies.
If KW seeks to maximize profits and sells the song directly, how many copies will he sell?
What is his profit?
Suppose KW cannot sell the song directly but must sell rights to copies of the song to the online retailer Hamazon, who in turn sells the copies to their customers at a price of $P per copy. Hamazon has no marginal or fixed costs of selling the song.
Under double marginalization, the quantity of copies sold will be...?
Under double marginalization, the total profits of KW and Hamazon combined from sales of the song will be...?
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