Suppose That a Professional Photographer Takes a Prize-Winning Digital Photo

question 239

Multiple Choice

Suppose that a professional photographer takes a prize-winning digital photo. She can sell a 5"x7" color print of the photo for $10. She can also sell the digital file for $20. There are 500 people willing to buy the color print and 2,000 people willing to buy the digital file. Assume the costs to the photographer are zero and that the people who purchase the digital file cannot resell the file itself or any prints made from it. What should she do in order to maximize her profits?

• A)earn $5,000 by selling only the color prints
• B)earn $40,000 by selling only the digital files
• C)earn $45,000 by selling both the color prints and the digital files at their respective prices
• D)We do not have enough information with which to answer this question.

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Definitions:

Comparative Advantage

An economic principle that states that an entity (e.g., country, region, or individual) can produce a good at a lower opportunity cost compared to others, leading to more efficient trading possibilities.

Absolute Advantage

The capacity of a nation, person, corporation, or area to generate a product or offer a service at a per-unit cost that is cheaper than the per-unit cost at which any other party produces the same product or service.

Frederic Bastiat

A French economist, writer, and prominent member of the French Liberal School in the 19th century, known for his advocacy of free trade and the critique of socialism.

Absolute Advantage

The ability of a country, company, or individual to produce a good or provide a service more efficiently than competitors, using the same amount of resources.