Suppose you own a small Italian news website. Your team consists of journalists who write news articles on the website. The wage of each journalist is 3000 per month. Your office building and utilities cost 8000 per month. The business earns ad revenue on each article itproduces.

From past experience, you know the number of articles you can produce based on the number of journalists you employ.

No. of Journalists No. of articles per month

1 15

2 29

3 42

4 54

5 65

6 75

7 84

8 92

9 99

10 105

You may use the following Excel sheet to help with calculations.

Italian News Website Excel - Attached with email

Question 2A:Assume that the business was operating at the profit maximising level of output before Covid-19. Each article brought in an ad revenue of 375.

• How many articles was the business producing?
• What was the total profit?
• Explain conceptually how you arrived at the profit maximising level of output. You don't need toshowexact calculations.

Question 2B:On 9th March 2020, Italy went into lockdown. As a result, you had to shut down your office and adopt a 'work from home' policy. This eliminated your fixed costs of 8000. At the same time, your ad revenue per article reduced to 250. This was because all companies suddenly reduced their advertising spending.

• How many journalists would you have to fire? Assume that you only care about maximising profits.
• What is your new total profit?
• Why did you fire the journalists? Explain your answer conceptually. You don't need to show exact calculations.