Question

In 2018, pop star Drake was downloaded twice as often as Cardi B. However, downloads for both these artists sold for the same price on Apple’s iTunes store. Does this suggest that Apple is failing to maximize profits? Use a picture or pictures to answer. You can make a reasonable assumption that the marginal cost to Apple of supplying a download is a constant $0.25.

Answer 1

Not necessarily that Apple is failing to maximise profits as this is not conclusive evidence. Apple can make multiple profits by signing popstars on iTunes at low cost and still generate profits through advertising and other mediums irrespective of downloads. Thus, we need variety of factors to assess before we conclude Apple fails to maximise profits.

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