Suppose that East Frisian Press publishes a new edition only after two years and that demands and costs are as in the previous problems. Suppose that it sets two different prices p1 and p2 in the two periods.
(a) Write an expression for the total number of new copies sold at prices p1 and p2 and show that this number depends on p2 but not on p1.
(b) Show that at prices p1 and p2, the difference between revenues and variable costs is equal to
100(90p1 + 108p2 + 1.4p1p2 − p21 − 2.2p22 − 1, 800)..
(c) Calculate the prices p1 and p2 that maximize the difference between total revenue and variable costs and hence maximize profits.
(d) If East Frisian Press chooses its profit-maximizing p1 and p2, compare the cost of using Microeconomics for the Muddleheaded for a student who buys the book when it is first published and resells it at the end of the first year with the cost for a student who buys the book at the beginning of the second year and then discards it.