Digital Books, LLC earns a yearly positive economic profit of $25,000 if it can sell 10,000 e-books. Each time, a customer buys an e-book it incurs a cost of $0.50 (cost of downloading each e-book). Digital Books, LLC spends each year $100,000 developing new e-books (new topics and new editions).
- What is the profit-maximizing price of e-books in the short run? Please, Explain how you get the formula for profit maximizing price. Profit=TR-TC If you put MC instead of TC in short run explain why.
- What is your prediction of the profit-maximizing price of e-books in the long run? Will it be equal to MC?