Suppose you own a small Italian news website. Your team consists of journalists who write news articles on the website. The wage of each journalist is €3000 per month. Your office building and utilities cost €8000 per month. The business earns ad revenue on each article it produces. From past experience, you know the number of articles you can produce based on the number of journalists you employ. No. of Journalists No. of articles per month 1 15 2 29 3 42 4 54 5 65 6 75 7 84 8 92 9 99 10 105 You may use the following Excel sheet to help with calculations. 

Question: On 9th March 2020, Italy went into lockdown. As a result, you had to shut down your office and adopt a ‘work from home’ policy. This eliminated your fixed costs of €8000. At the same time, your ad revenue per article reduced to €250. This was because all companies suddenly reduced their advertising spending. How many journalists would you have to fire? Assume that you only care about maximising profits. (3 marks) What is your new total profit? (2 marks) Why did you fire the journalists? Explain your answer conceptually. You don’t need to show exact calculations. (5 marks)

Answer rating: 100% (QA)

Ans 2A for maximum profit no of journalist will be 7or 8 No of articles per month will be producing ... View the full answer