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

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

Step-by-step explanation

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

The total revenue accrued

`=40*2000`

`=$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* 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* 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* 1400`

`=77000` dollars

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