Author Question: Roaring Lion Studios can produce DVDs at a constant marginal cost of 5 per disk, and the studio has ... (Read 53 times)

hubes95 · **on:** Jul 1, 2018

Roaring Lion Studios can produce DVDs at a constant marginal cost of 5 per disk, and the studio has just releasing the DVD for its latest hit film, Ernest Goes to the Hamptons.

The retail price of the DVD is 25, and the elasticity of demand for this film is -2. Has the studio selected the profit-maximizing retail price for this DVD? A) Yes
B) No, the retail price is too low
C) No, the retail price is too high
D) We do not have enough information to answer this question.

Question 2

DVDs can be produced at a constant marginal cost, and Roaring Lion Studios is releasing the DVDs for its last two major films. The DVD for Rambeau 17 is priced at 20 per disk, and the DVD for Schreck 10 is priced at 30 per disk.

If the Lerner indices for Rambeau 17 divided by the Lerner index for Schreck 10 equals 0.5, what is the constant marginal cost of producing both DVDs? A) MC = 10
B) MC = 15
C) MC = 20
D) MC = 5