Are you a price taker or a price maker in the advertising market?

Costume Show more According to the article in the Time magazine (October 4th 2012) Millions on Pet Halloween Costumes? Why We Spend More and More on Pets American consumers were expected to spend $370 million on pet costumes for the 2012 Halloween. According to the same source not only were more people purchasing Halloween costumes for their dogstheres been a 24% increase since 2010but they were spending much much more per costume with a rise of 40% in overall spending in two years. Suppose that you read this article published on Time Magazine and have decided to publish a magazine on costumes for pets. There are no other magazines in the market specialized on this subject. Let the inverse demand curve for your magazines subscriptions be represented by P(Q) where P is the price of a subscription. The magazines marginal cost per subscription is constant at M (primarily printing paper and mailing) and its fixed cost is F (officespace and payments to its editorial staff authors and photographers). a) Are you a price taker or a price maker in the advertising market? Explain. b) Assume that the advertising market determines that you charge aQ for an ad where a is the price per unit of circulation that is set by the advertising market. Suppose also that the n firms that produce costumes for dogs are each willing to place one ad per issue if the price is aQ . Illustrate graphically the effects of Advertising Sales on your magazines price per subscription and number of subscriptions sold per year. Discuss your graph and set up mathematically your profit function. You are required to explain your profit function as well. Show less


Approximately 250 words