Question: A new musical group called The Incentives cuts a debut single. The record company determines a number of price points for the group's first single, "The Big Idea."
The record company can produce the song with fixed costs of $10,000 and no variable cost.
a. Determine the total revenue at each price. What is the marginal revenue as the price drops from one level to the next?
b. What price would maximize the record company's profits? How much would the company make?
c. If you were the agent for The Incentives, what signing fee would you request from the record company? Explain your answer.