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A news magazine offers students a discount on the regular subscription rate. The total number of subscriptions is optimal, and, at the current prices, the marginal revenue from the last subscription sold to a student is $6, while the marginal revenue from the last subscription sold to a regular customer is $10.
-In order to maximize profit, the magazine should

Question

Quizplus · Accepted Answer

To maximize profit, marginal revenue should be equalized across different customer segments. Since the marginal revenue from students is lower than from regular customers, the magazine should reduce the discount for students, thereby increasing their price, to bring the marginal revenues closer together.

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