Clarify what would be the optimal number of minutes sold
You are in charge of selling advertising minutes for a major television broadcast on your network, say the superbowl. Minutes are sold at a constant price per minute that you can set. There are 120 minutes that might be sold, no more. If you do not sell all 120 minutes, then you will use those minutes that are unsold to advertise your network’s TV shows. Your network tells you that the marginal value of each minute of advertising its own shows is $60,000. Describe the circumstances under which it is profit maximizing to sell all the 120 minutes and when it is not. In the latter case, clarify what would be the optimal number of minutes sold.
Comment: Length: couple paragraphs. Graphs can be included.
Hints:
– the demand for advertising minutes is quite relative
– consider capacity constraint
– consider opportunity cost
– this could be considered a “monopoly problem”.
