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Margarita [4]
3 years ago
12

The marginal cost of Alexa's Guide to Street People and Their Pets is constant at $5. Alexa sells 5,000 copies per year at $20 p

er copy. She would like to increase readership and hold total profit constant. If the price goes to $15, how many copies must she sell?
Business
1 answer:
ch4aika [34]3 years ago
3 0

Answer:

She must sell 7,500  copies to mantain the profits when price changes to $15.

Explanation:

  • Let's start with a definition of profit or benefit: Benefit=(Price-Cost)\times{Quantity}
  • At the beggining, she obtained a profit of $75,000: She sold 5,000 copies, and she got $20-$5=$15 dollars for each of the 5,000. units sold, which means a benefit of 15\times5,000=75,000 dollars.
  • Then, if she wants to keep the $75,000 profits when prices falls to $15, she must sell more copies:75,000=(15-5)\times{NewQuantity}. Then, the quantity she must sell to mantain the profit constant at $75,000 is New quantity=7,500.
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