A news magazine offers students a discount on the regular subscription rate. The

Question

A news magazine offers students a discount on the regular subscription rate. The total number of subscriptions is optimal, and, at the current prices, the marginal revenue from the last subscription sold to a student is $6, while the marginal revenue from the last subscription sold to a regular customer is $10.

a. What could the magazine do in order to maximize profit? Explain.

b. How would profit be affected if the magazine sells one more subscription to a regular customer and one less subscription to a student? Explain.

Explanation / Answer

marginal revenue from the last subscription sold to a student is $6

marginal revenue from the last subscription sold to a regular customer is $10.

in order to maximize profits magazine should sell more number to regular customers or give less discount to students

b) change in profit =(10 -6 ) = $4

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