2 Bob Bill Ben and Brad Baxter have just made a documentary

2. Bob, Bill, Ben, and Brad Baxter have just made a documentary movie about their basketball team. They are thinking about making the movie available for download on the Internet, and they can act as a single-price monopolist if they choose to. Each time the movie is downloaded, their Internet service provider charges them a fee of $4. The Baxter brothers are arguing about which price to charge customers per download. The accompanying table shows the demand schedule for their film.

Price of download

Quantity of downloads demanded

$10

0

8

1

6

3

4

6

2

10

0

15

a. Calculate the total revenue and the marginal revenue per download.

Price of download

Quantity of downloads demanded

Total Revenue

Marginal Revenue

$10

0

xx

8

1

6

3

4

6

2

10

0

15

b. Bob is proud of the film and wants as many people as possible to download it. Which price would he choose? How many downloads would be sold?

c. Bill wants as much total revenue as possible. Which price would he choose? How many downloads would be sold?

d. Ben wants to maximize profit. Which price would he choose? How many downloads would be sold?

e. Brad wants to charge the efficient price. Which price would he choose? How many downloads would be sold?

Solution

Total revenue is the total receipts of a firm from the sale of some given quantity\'s of a product. It can be calculated as the selling price of the firm\'s product times the quantity sold, i.e. total revenue = price