A publisher faces the following demand schedule for the next novel from one of its popular authors:
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A publisher faces the following demand schedule for the next novel from one of its popular authors:
Price | Qty Demanded |
100 | 0 |
90 | 100000 |
80 | 200000 |
70 | 300000 |
60 | 400000 |
50 | 500000 |
40 | 600000 |
30 | 700000 |
20 | 800000 |
10 | 900000 |
0 | 1000000 |
The author is paid $2 million to write the book and the marginal cost of publishing the book is constant at $10 per book.
a. Compute total revenue, total cost, and profit at each quantity. What quantity would a profit maximizing publisher choose? What price it should charge?
b. Compute marginal revenue.
c. Graph the marginal revenue, marginal cost, and average revenue. At what quantity do the marginal revenue and marginal cost curves cross.
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