4. Selling a book can be considered a monopoly because copyright laws grant the author the...
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4. Selling a book can be considered a monopoly because copyright laws grant the author the exclusive right to sell it (so they have no competitors). Imagine that lvaro is planning to sell his book "101 Funniest Excuses Students Have Told Me." The fixed costs associated with the production of the book are $100 and the variable costs associated with the production of the book are $1 per copy of the book. a) Calculate lvaro's total revenue, total cost, marginal revenue, and marginal cost for each quantity of books demanded. Show your calculations. b) If lvaro wants to maximize his profit, how many copies of the book should he produce (remember that he is operating in a monopoly market)? Justify your answer. c) Graph lvaro's demand, marginal revenue, and marginal cost curves in the same coordinate system. Do not forget to label the axes and each curve. Hint: Graph quantity on the x-axis and dollars on the y-axis (to represent price, revenue, and cost). Price Quantity Demanded Total Revenue Total Cost Marginal Revenue Marginal Cost $100 0 Na N/A N/A $90 100 $80 200 $70 $60 300 g 400 $50 500 $40 600 $30 700 $20 d) Calculate the area of total consumer surplus when lvaro is producing the profit-maximizing quantity of books. Show your calculations. 800 e) Calculate the area of deadweight loss when lvaro is producing the profit-maximizing quantity of books. Show your calculations. $10 900 4. Selling a book can be considered a monopoly because copyright laws grant the author the exclusive right to sell it (so they have no competitors). Imagine that lvaro is planning to sell his book "101 Funniest Excuses Students Have Told Me." The fixed costs associated with the production of the book are $100 and the variable costs associated with the production of the book are $1 per copy of the book. a) Calculate lvaro's total revenue, total cost, marginal revenue, and marginal cost for each quantity of books demanded. Show your calculations. b) If lvaro wants to maximize his profit, how many copies of the book should he produce (remember that he is operating in a monopoly market)? Justify your answer. c) Graph lvaro's demand, marginal revenue, and marginal cost curves in the same coordinate system. Do not forget to label the axes and each curve. Hint: Graph quantity on the x-axis and dollars on the y-axis (to represent price, revenue, and cost). Price Quantity Demanded Total Revenue Total Cost Marginal Revenue Marginal Cost $100 0 Na N/A N/A $90 100 $80 200 $70 $60 300 g 400 $50 500 $40 600 $30 700 $20 d) Calculate the area of total consumer surplus when lvaro is producing the profit-maximizing quantity of books. Show your calculations. 800 e) Calculate the area of deadweight loss when lvaro is producing the profit-maximizing quantity of books. Show your calculations. $10 900
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