An online news site earns revenue by selling subscriptions at price pS and ads at price...

An online news site earns revenue by selling subscriptions at price pS and ads at price pA. For simplicity, assume the site has zero marginal cost. Consumer demand for subscriptions is given by:

Qs=1-Ps

Demand from advertisers for ad-space depends on the number of subscribers though:

Qa=Qs(1-Pa)

What price should the firm charge for subscriptions and ads, considered jointly, to maximize profits?

Expert Solution

Firm earns revenue by selling subscriptions and sites.Firm has zero marginal costs

We have to calculate price for subscriptions and ads that firm should charge if it considers maximizing profits jointly

Rahul Sunny answered 3 months ago

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