In Hollywood there is only one newspaper, the Hollywood Reporter.
The demand for the paper depends on the price and the amount of
scandal reported. The demand function is Q = 15S负二分之一次方 乘以p负三次方, where Q is
the number of issues sold per day, S is the number of column inches
of scandal reported in the paper, and P is the price. Scandals are
not a scarce commodity in Hollywood. However, it takes resources to
write, edit and print stories of scandal. The cost of reporting S units of
scandal is $10S. This cost is independent of the number of papers sold.
In addition it costs money to print and deliver the paper. These cost
$0.10 per copy and is independent of the amount of scandal reported
in the paper. Therefore the total cost of printing Q copies of the paper
with S column inches of scandal is $10S + 0:10Q:
(a) Calculate the price elasticity of demand for the Hollywood Re-
porter.
(b) Solve for the pro…t-maximising price per newspaper.
(c) If the Hollywood Reporter charges its pro…t-maximising price, and
prints the pro…t-maximising amount of scandal, how many column
inches of scandal should it print (rounded to the nearest integer)?
How many copies will be sold?