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ID: 1142708 • Letter: H
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home / study / business / economics / economics questions and answers / hi, please answer this question. thanks! digital books, llc is a company that sells e-books ... Your question has been answered Let us know if you got a helpful answer. Rate this answer Question: Hi, Please answer this question. Thanks! Digital Books, LLC is a company that sells e-books relat... Hi, Please answer this question. Thanks! Digital Books, LLC is a company that sells e-books related to career advising and professional development. Digital Books, LLC earns a yearly positive economic profit of $25,000 if it can sell 10,000 e-books. Each time, a customer buys an e-book it incurs a cost of $0.50 (cost of downloading each e-book). Digital Books, LLC spends each year $100,000 developing new e-books (new topics and new editions). What is the profit-maximizing price of e-books in the short run? What is your prediction of the profit-maximizing price of e-books in the long run? Will the profit-maximizing price of e-books change in the long run? Why? Why not?
Receiveing the Economic Profit means the company maximizes it?
Explanation / Answer
Digital Books, LLC earns a yearly positive economic profit of $25,000 if it can sell 10,000 e-books
Cost of each book: $0.50
Digital Books, LLC spends each year $100,000 developing new e-books
In the shorter run, we may have to go by the concept of marginal cost and revenue when fixed cost in involved and there is no change in it in a long period of time. The same can be recovered over a period of time through a large quantity.
Here, Digital Books, LLC spends each year $100,000 developing new e-books, hence this is a cost for every year and becomes a running cost.
Cost of development per book= $10
Hence selling price per book for 10000 books = cost perbook+profit per book= (10+0.5)+(25000/10000)= $ 13 / book
This is applicable in the short run.
In the long run, the same will be applicable due to the lack of involvement of fixed cost in the scenario resulting in no change in selling price.
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