Question

The company can produce the CD with no fixed cost and a variable cost of $5 per CD.

a.      Find total revenue for quantity equal to 10,000, 20,000, and so on. What is the marginal revenue for each 10,000 increase in the quantity sold?

b.     What quantity of CDs would maximize profit? What would be the price be? What would the profit be?

c.      If you were Johnny’s agent, what recording fee would you advise Johnny to demand from the record company? Why?

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