Suppose that a professional photographer takes a prize-winning digital photo. She can sell a 5"x7" color print of the photo for $10. She can also sell the digital file for $20. There are 500 people willing to buy the color print and 2,000 people willing to buy the digital file. Assume the costs to the photographer are zero and that the people who purchase the digital file cannot resell the file itself or any prints made from it. What should she do in order to maximize her profits?
A)earn $5,000 by selling only the color prints
B)earn $40,000 by selling only the digital files
C)earn $45,000 by selling both the color prints and the digital files at their respective prices
D)We do not have enough information with which to answer this question.

Question

Quizplus · Accepted Answer

By selling both the color prints and digital files, the photographer can earn $10x500 = $5,000 from selling color prints and $20x2,000 = $40,000 from selling digital files, for a total of $45,000 in profits. This is the maximum profit the photographer can earn by taking advantage of both markets.

Suppose That a Professional Photographer Takes a Prize-Winning Digital Photo