A publisher faces the following demand schedule for the next novel from one of i

Question

A publisher faces the following demand schedule for the next novel from one of its popular authors

Marginal revenue

The author is paid 2million to write a book, and the marginal cost of publishing the book is a constant $10 per book.

a. Compute TR, MR, TC and MC in the table above.

b. What quantity would a profit-maximizing publisher choose?

c. What price would they charge?

d. how much profit would the publisher make?

e. graph the demand curve, marginal revenue curve, and the marginal cost curve. Illustrate the profit-maximizing quanity the publisher would produce and the price they would charge.

price quantity demanded total revenue

Marginal revenue

total cost marginal costs $100 0 novels 90 100,000 80 200,000 70 300,000 60 400,000 50 500,000 40 600,000 30 700,000 20 800,000 10 900,000 0 1,000,000

Explanation / Answer

Ans)

a.

b.

A profit-maximizing publisher would choose a quantity of 400,000 or a quantity of 500,000.

c.

If a profit-maximizing publisher would choose a quantity of 400,000 at a price of 60 or a quantity of 500,000 at a price of 50.

d.

The profit would be $18000000.

price quantity demanded total revenue=price*quantity Marginal revenue=Change in revenue/Change in price total cost marginal costs $100 0 2000000 90 1,00,000 9000000 90 3000000 10 80 2,00,000 16000000 70 4000000 10 70 3,00,000 21000000 50 5000000 10 60 4,00,000 24000000 30 6000000 10 50 5,00,000 25000000 10 7000000 10 40 6,00,000 24000000 -10 8000000 10 30 7,00,000 21000000 -30 9000000 10 20 8,00,000 16000000 -50 10000000 10 10 9,00,000 9000000 -70 11000000 10 0 10,00,000 0 -90 12000000 10

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