.0001pt;text-align:
justify;line-height:normal”>Question One [15 marks]The Wise Economists, a top rock band,
have just finished recording their latest music album. Their record companyâs
marketing department have determined that the demand for downloads for the
album is as follows:Price No.
of downloads Total Revenue Total Cost Total
Profit Marginal Revenue Marginal Cost 24 10,000 240,000 50,000 190,000 22 20,000 440,000 100,000 340,000 20 5 20 30,000 600,000 150,000 450,000 16 5 18 40,000 720,000 200,000 520,000 12 5 16 50,000 800,000 250,000 550,000 8 5 14 60,000 840,000 300,000 540,000 4 5 The company can produce the album
with no fixed cost and a variable cost of â¬5 per download: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 downloads would maximise profit? What would the price and profit
be?Profit is maximized at quantity
50,000 and price of 16. Profit=550,000c. If
you were the Wise Economistsâ agent, what recording fee would you advise them
to demand from the record company and why?