Newspapers have two important sources of revenue: sales and advertising. Advertising is linked to circulation, so a lower price that generates higher circulation tends to raise advertising revenue. You were also told that overhead costs are on the order of $525,000 a day for each firm. Marginal costs per copy (including retail allowances) are estimated to be $0.12 for the Post and $0.13 for the News. Also, depreciation of equipment (printing presses, trucks, computers, etc.) averages about $0.06 per copy for each newspaper (although the depreciation cost per copy is higher when circulation is lower, and vice-versa2).

2) To answer this question, replace the data from the previous table with a modied and simplied set of average daily numbers, in the table below. You can continue to assume the same marginal costs and fixed costs as before. And, again, all of this information is common knowledge in the industry. $0.50 $0.50 $00,000 550,000 $500,000 $450,000 $0.25 $0.25 1,000,000 650,000 $600,000 $500,000 $0.50 $0.25 600,000 950,000 $400,000 $650,000 $0.25 $0.50 1,200,000 250,000 $700,000 $300,000 Suppose that each newspaper has complete exibility as to what price per copy to charge (rounded off to the nearest penny). Now, based on what you can glean from the revised information in the new table, what price should the Daily News charge? Explain