In Robertsville, Missouri, there is only one newspaper, the Daily Gossip. The de

Question

In Robertsville, Missouri, there is only one newspaper, the Daily Gossip. The demand for the newspaper depends on the price and the amount of scandal reported. The demand function is q = 15s^1/2 p^-3, where q is the number of issues sold per day, s is the number of column inches of scandal reported in the paper, and the p is the price. It costs money to print and deliver the paper. These cost $0.10 per copy (so the marginal cost is $0.10) and it is independent of the amount of scandal reported in the paper. Find the profit-maximizing price for a copy of the Daily Gossip. Call it p*. If the Daily Gossip charges p* and prints 100 column inches of scandal, how many copies would it sell? Scandals are not a scarce commodity in Robertsville. However, it takes resources to write, edit, and print stories of scandal. The cost of reporting s column-inches of scandal is $10s. These costs are independent of the number of papers sold. What is the profit-maximizing amount of scandal?

Explanation / Answer

Because Daily gossip news paper has monopoly power in the market . So it will try to get maximum profit by applying price descrimination policy. In the inelastic market he will charge high price more then marginal cost. but in the elastic market he wll charge less price ,equal to marginal cost.

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