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A TV cable company has 6400 subscribers who are each paying ​$28 per month. It can get 160 more subscribers for each​ $0.50 decrease in the monthly fee. What rate will yield maximum​ revenue, and what will this revenue​ be?

User Jason Ayer
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1 Answer

4 votes

Answer:

Explanation:

Here is a step-by-step explanation of the solution and how it leads to the maximum revenue:

Let's start with the current revenue generated by the TV cable company, which is the product of the number of subscribers and the monthly fee:

Current revenue = Number of subscribers * Monthly fee

Current revenue = 6400 * $28

Current revenue = $179,200

To increase the revenue, the TV cable company can decrease the monthly fee by $0.50, which will result in an increase in the number of subscribers by 160 for each $0.50 decrease. Let's calculate the additional revenue generated by each $0.50 decrease in the monthly fee:

Additional revenue per decrease in monthly fee = Increase in subscribers * Decrease in monthly fee

Additional revenue per decrease in monthly fee = 160 * $0.50

Additional revenue per decrease in monthly fee = $80

The TV cable company can continue to decrease the monthly fee by $0.50 until the revenue stops increasing. Let's calculate the number of $0.50 decreases in monthly fee required to reach the maximum revenue:

Number of $0.50 decreases in monthly fee = (Total revenue - Current revenue) / Additional revenue per decrease in monthly fee

Number of $0.50 decreases in monthly fee = ($20,000,000 - $179,200) / $80

Number of $0.50 decreases in monthly fee = 248,525

The corresponding decrease in monthly fee is:

Decrease in monthly fee = Number of $0.50 decreases in monthly fee * Decrease in monthly fee

Decrease in monthly fee = 248,525 * $0.50

Decrease in monthly fee = $124,262.50

The corresponding increase in subscribers is:

Increase in subscribers = Number of $0.50 decreases in monthly fee * Increase in subscribers

Increase in subscribers = 248,525 * 160

Increase in subscribers = 39,764,000

The total number of subscribers at the maximum revenue point is:

Total subscribers = 6400 + Increase in subscribers

Total subscribers = 6400 + 39,764,000

Total subscribers = 39,770,400

The monthly fee at the maximum revenue point is:

Monthly fee = Current revenue / Total subscribers

Monthly fee = $179,200 / 39,770,400

Monthly fee = $0.0045

The maximum revenue is:

Maximum revenue = Total subscribers * Monthly fee

Maximum revenue = 39,770,400 * $0.0045

Maximum revenue = $178,966.80

Therefore, the TV cable company can generate maximum revenue of $178,966.80 per month by decreasing the monthly fee by $0.50 for each 160 additional subscribers.

User Ismam Al Hoque
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