Account question

profileDee Redd
P-2-4-1.pdf

Comments

Take a look at the problem. It seems to me as though we are deciding what to do in weeks 3 and 4 of the

original movie. The choice seems to be stay or switch. There's a level of expected ticket sales for "Paris" in

weeks 3 and 4, and a level of expected ticket sales for "I Do" in those weeks. The question might be

phrased "what level of expected ticket sales for Paris gives the same profit as might be expected for I Do?"

This makes it a kind of an opportunity cost question -- at what level of ticket sales for “I Do,” does “I Do”

beat the opportunity cost of staying with “Paris?”

Profit in week 3 of “Paris,” if we keep “Paris:”

Revenue – Variable Cost – Fixed Cost = Profit

$6.50*T(Paris) – 80%*$6.50*T(Paris) - $1,000 = Profit(Paris)

Profit in week 3 of what might be “Paris,” if we drop “Paris,” if we switch to “I Do:”

Revenue - Variable Cost - Fixed Cost = Profit

$6.50*T(I Do) – 90%*$6.50*T(I Do) - $1,000 = Profit(I Do)