1 down on our luck studio has spent 100 million producing

Reference no: EM13376064

1. Down on our Luck Studio has spent $100 million producing an awful film, A Depressing Story about a Miserable Person. If the studio releases the film, the most cost-effective marketing plan would cost an additional $5 million, bringing the total amount spent to $105 million. Box office sales under this plan are predicted to be $12 million, which would be split evenly between the theaters and the studio. Additional studio revenue from video and DVD sales would be about $2 million. Should the studio release the film? If no, briefly explain why not. If yes, explain how it could make sense to release a film that cost $105 million but earns only $12 million.

3. The following data are price/quantity/cost combinations for Titan Industry's mainframe computer division:

Quantity Price per unit Total Cost of Production

0 Above $225,000 $200,000

1 $225,000 $250,000

2 $175,000 $275,000

3 $150,000 $325,000

4 $125,000 $400,000

5 $90,000 $500,000

a. What is the marginal revenue if output rises from 2 to 3 units?

b. What quantity should Titan produce to maximize total revenue? Total profit?

c. What is Titan's fixed cost? How do Titan's marginal costs behave as output increases?

Reference no: EM13376064

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