Final answer:
The relevant cost of showing the new film in the multiplex is $6,000 per week. This cost is specific to the payment made to the film’s producer and does not include the potential revenue of $8,000 normally earned by the theater.
Step-by-step explanation:
The student asked about the relevant cost of showing a new film in a multiplex that normally earns $8,000 per week for a typical film. To show this new film, the multiplex pays $6,000 per week to the film’s producer. The relevant cost in this scenario would be $6,000 per week, which is what the multiplex has to pay out to show the film. The potential earning of $8,000 for a typical film is not a cost but rather the opportunity cost or the potential revenues foregone by showing the new film instead.
In the world of producing and distributing films, costs can exceed $100 million, recovered through various revenue streams like box office sales and subscription services. Theaters have limited seats and showings, placing a cap on maximum earnings. City governments occasionally implement price floors to support struggling movie theaters, influencing consumer and producer surplus and potentially causing a deadweight loss.