Question -
An e-commerce company sells e-books related to self improvement topics. All e-books are sold at the same price. Currently, the company can earn a maximum annual profit of $25,000 when it sells 10,000copies during the year. The company incurs a cost of 50 cents each time a consumer downloads a copy of an e-book. The company must spend $100,000 per year to develop new editions of the e-books. The company has determined that it would earn zero economic profits if it could sell annually 20,000 copies.
- In the short run, what is the profit-maximizing price of e-books?
- How would you characterize the industry in which this company operates? Why?