Shooting Star Books is a small publishing company that specializes in science fi

Question

Shooting Star Books is a small publishing company that specializes in science fiction
books. Like most publishers, Shooting Star releases new books in hard-cover form and
later releases paper-back versions of the books. The marginal cost of printing both types of books is $2 per book, and Shooting Star maximizes profits by practicing inter-temporal price discrimination. The annual demand for recently released (hard-cover) books is Q1 = 400 — 10P1 where quantity demanded is measured in thousands of books and price is measured in dollars per book. The annual demand for the paper-back version of previously released books is Q2 =800 — 40P2.

a. What are the marginal revenue curves associated with the two demand curves for
books?
b. What are the marginal revenue prices for hard-cover and paper-back books?
What are the quantities of books demanded at these prices for hard-cover and
paper-back books?
c. Suppose the market demand for paper-back books shifts to Q2 = 150 — 100P2.
How does this change affect the profit maximizing price and quantity in the paper-back book market? Does this change affect the profit maximizing outcome
in the hard-cover book market?

Explanation / Answer

a) Q1= 400- 10P1 P1= 40- Q1/10 R= P1Q1= 40Q1 -Q1^2/10 MR= 40- Q1/5 (derivative of R) Q2= 800- 40P2 P2= 20- Q2/40 R= P2Q2= 20 Q2 -Q2^2/40 MR= 20- Q^2/20 b) MR=MC so 2= 40- Q1/5 Q1= 190 P= 40- 190/10= 21 20-Q^2/20= 2 so Q2= 360 P= 20- 360/40= 11 c) Q2= 150- 100P2 P2= 1.5 -Q2/100 R= P2Q2= 1.5Q2- Q2^2/100 MR= 1.5 -Q2/50 2= 1.5-Q2/50 Q2= 0 no books are produced. Shouldn't change the other outcome.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.