Read Chapter 13 of the text (Ch.13: \"Costs of Production\" from Mankiw\'s \"Pri

Question

Read Chapter 13 of the text (Ch.13: "Costs of Production" from Mankiw's "Principles of Economics"). Then respond to the following prompt:

In 2011, Louis C.K. allowed fans to pay just $5 to download a performance of a live show in Boston. What must be true about the cost structure to make this business strategy worthwhile to the comedian?

*Note: Ch. 13 key concepts are:

total revenue, total cost, profit, explicit costs, implicit costs, economic profit, accounting profit, production function, marginal product, diminishing marginal product, fixed costs, variable costs, average total cost, average fixed cost, average variable cost, marginal cost, efficient scale, economies of scale, diseconomies of scale, constant returns to scale

THANKS!!

Explanation / Answer

Now the marginal cost of production is minimal for a comedian as he has performed, all the cost has incurred and any revenue recieved from the online sale is additional profit. So the marginal revenue per download is $5 so till the marginal cost is below the marginal revenue it is beneficiary to sell.

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