Question

A company can sell 2000 magazine subscriptions at $40 each. For each $5 increase in the price, it will sell 200 fewer subscriptions. What subscription price will provide the maximum revenue for the company?

$55

$40

$45

$50

Answer 1

ANSWER

The subscription price of $45 provides the maximum revenue for the company

EXPLANATION

When the price is $$40$, the company sells $2000$ quantities.

The total revenue accrued

$=40\times2000$

$= 80,000$

When the price increases to $$45$ the quantity sold will decrease by 200 magazines which is $2000-200=1800$

The total revenue accrued

$=45\times 1800$

$=81000$ dollars

When the price increases to $$50$ the quantity sold will decrease by 200 magazines again which is $1800-200=1600$

The total revenue accrued

$=50\times 1600$

$=80000$ dollars

When the price increases to $$55$ the quantity sold will decrease by 200 magazines which is $1600-200=1400$

The total revenue accrued

$=55\times 1400$

$=77000$ dollars

Hence a subscription price of $45 provides the maximum revenue for the company.