Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Question
Chapter CS, Problem 1CBE
To determine
To explain: The revenue will increase or not.
Expert Solution & Answer
Answer to Problem 1CBE
Yes the revenue will be increased.
Explanation of Solution
Consider the profit formula,
Where,
Now, consider the table shown below,
| Price | No. of Subscribers | Cost of license fees | Divisional, general and adm costs | TR | TC | Profit |
| 5 | 29.974 | 134.883 | 14.5 | 149.87 | 149.383 | 0.487 |
| 6.5 | 22.657 | 101.956 | 14.5 | 147.2705 | 116.456 | 30.8145 |
| 7 | 19.897 | 89.537 | 14.5 | 139.279 | 104.037 | 35.242 |
| 7.5 | 16.671 | 75.017 | 14.5 | 125.0325 | 89.517 | 35.5155 |
| 8 | 20.492 | 92.213 | 14.5 | 163.936 | 106.713 | 57.223 |
| 8.5 | 20 | 89.998 | 14.5 | 170 | 104.498 | 65.502 |
| 9 | 19.76 | 88.92 | 14.5 | 177.84 | 103.42 | 74.42 |
| 9.5 | 17.123 | 77.053 | 14.5 | 162.6685 | 91.553 | 71.1155 |
| 10 | 12.643 | 56.896 | 14.5 | 126.43 | 71.396 | 55.034 |
| 10.5 | 12.785 | 57.532 | 14.5 | 134.2425 | 72.032 | 62.2105 |
| 11 | 12.216 | 54.974 | 14.5 | 134.376 | 69.474 | 64.902 |
| 11.5 | 13.246 | 59.608 | 14.5 | 152.329 | 74.108 | 78.221 |
| 12 | 8.637 | 38.867 | 14.5 | 103.644 | 53.367 | 50.277 |
| 12.5 | 10.595 | 47.78 | 14.5 | 132.4375 | 62.28 | 70.1575 |
| 14 | 2.739 | 12.326 | 14.5 | 38.346 | 26.826 | 11.52 |
| 14.5 | 5.291 | 23.809 | 14.5 | 76.7195 | 38.309 | 38.4105 |
| 15 | 3.051 | 13.73 | 14.5 | 45.765 | 28.23 | 17.535 |
Figure-1
Consider figure-1, the profit is maximized at Price of
Economics Concept Introduction
The profit is obtained by subtracting the product of price and number of subscribers with the total cost.
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Re:Revenue from EPIX
We recently added the EPIX Movie Channels as part of a new tier of programming for our digital video subscribers. The EPIX channels are sold as an add-on package for $9.75 per month, but we would like to potentially increase our revenue from our subscriber base. Currently we have about 15,059 subscribers, generating monthly revenue of $146,823.Some have suggested we should cut price, as customers tend to be fairly price sensitive for add-on packages. However, in this case, if we lower price for our new subscribers, we really need to cut it to all of our existing subscribers as well. I have some concerns that lowering price will be counter-productive.The marketing department calculated some subscription levels at various price points in this region, and I need you to perform the analysis.…
The following graph illustrates the weekly demand curve for motorized scooters in Roanoke.
Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.
Note: You will not be graded on any changes made to this graph.
PRICE (Dollars per scooter)
260
240
220
200
180
160
140
120
100
80
60
40
20
0
0 9 18 27
A
X
B
Demand
36 45 54 63 72 81
QUANTITY (Scooters)
90 99 108 117
Total Revenue
?
The following graph illustrates the weekly demand curve for motorized scooters in Madison.
Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.
Note: You will not be graded on any changes made to this graph.
PRICE (Dollars per scooter)
325
300
275
250
225
200
175
150
125
100
75
50
25
0
0 10
A
+
20 30
X
B
Demand
40 50 60 70 80
QUANTITY (Scooters)
90 100 110 120 130
Total Revenue
?
Chapter CS Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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