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A publisher faces the following demand schedule for the
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A publisher faces the following demand schedule for the next novel from one of its popular authors:Price Quantity Demanded$1000 novels90 100,00080 200,00070 300,00060 400,00050 500,00040 600,00030 700,00020 800,00010 900,0000 1,000,000The author is paid $2 million to write the book, and the marginal cost of publishing the book is a constant $10 per book.a.Compute total revenue, total cost, and profit at each quantity. What quantity would a profit-maximizing publisher choose? What price would it charge? b.Compute marginal revenue. (Recall that MR=TR/Q.) How does marginal revenue compare to the price? Explain.c.Graph the marginal-revenue, marginal-cost, and demand curves. At what quantity do the marginal-revenue and marginal-cost curves cross? What does this signify?d.In your graph, shade in the deadweight loss. Explain in words what this means.e.If the author were paid $3 million instead of $2 million to write the book, how would this affect the publishers decision regarding what price to charge? Explain.f.Suppose the publisher was not profit-maximizing but was concerned with maximizing economic efficiency. What price would it charge for the book? How much profit would it make at this price?
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QUESTION:
A publisher faces the following demand schedule for the next novel from one of its popular authors:Price Quantity Demanded$1000 novels90 100,00080 200,00070 300,00060 400,00050 500,00040 600,00030 700,00020 800,00010 900,0000 1,000,000The author is paid $2 million to write the book, and the marginal cost of publishing the book is a constant $10 per book.a.Compute total revenue, total cost, and profit at each quantity. What quantity would a profit-maximizing publisher choose? What price would it charge? b.Compute marginal revenue. (Recall that MR=TR/Q.) How does marginal revenue compare to the price? Explain.c.Graph the marginal-revenue, marginal-cost, and demand curves. At what quantity do the marginal-revenue and marginal-cost curves cross? What does this signify?d.In your graph, shade in the deadweight loss. Explain in words what this means.e.If the author were paid $3 million instead of $2 million to write the book, how would this affect the publishers decision regarding what price to charge? Explain.f.Suppose the publisher was not profit-maximizing but was concerned with maximizing economic efficiency. What price would it charge for the book? How much profit would it make at this price?
ANSWER:Step 1 of 7
The total cost incurred by a producer or a seller is the summation of the cost incurred on each additional unit of variable factors of production and the fixed cost incurred irrespective of the quantity produced or sold. Further, the total revenue is the product of the market price charged by the producer and the quantity produced or sold at that specific price.