You are asked to analyze the market for economic textbooks, in particular the conditions determining the...
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You are asked to analyze the market for economic textbooks, in particular the conditions determining the supply of textbooks. A printing house is willing to print the book at a cost of pp per book. To produce a textbook, a publishing house needs to hire an economics professor as an author. There are authors of different quality. Denote the quality of an author by Q. For each quality level, there is only one author available. If an economic professor does not write a textbook and concentrates on teaching and research, she will receive a wage of W₁ The amount of books that a printing house can sell is equal to N(M.Q)-log (MQ), where M denotes marketing inputs whose price is PM. Assume that the price of textbooks is independent of the Quality of the author and is given by pp. A.) B.) C.) D.) E.) Assume that a publishing house hires an author of quality Q and pays him a wage W. Given this choice of quality, please find the cost function for supplying V books to the market. This cost function should be a function C(N, W.PM. PP, Q) - that is, it takes as its arguments the quantity N, the wage W. the prices PM and pp. and the quality of the author Q. (Hint: First find how much M is required to sell N goods if an author of quality Q is hired. Then find the other cost components) It turns out that the optimal quantity of books that a publishing will produce if it hires an author of quality Q is N (Q.PB.PM) = log (P-PEQ). Using this expression, how much will a publishing house be willing to pay an author of quality Q? Now, assume that due to innovations in the use of social media, it becomes easier to market textbooks. Thus, the function N(M,Q) now changes to N(M,Q) = log (2MQ). Another way of representing this change would be to say that the price of the marketing inputs declines by 50%. Assume that the price of the textbook in equilibrium will be unchanged (because the demand for textbooks is infinitely elastic). How would this change affect the wage that a publishing how would be willing to pay an author of quality Q? Assume now that the demand for textbooks is not infinitely elastic. Rather the demand for textbooks slopes downwards? Explain briefly (less than 100 words) - no math is necessary here, the intuition suffices. Now, assume again that the price of textbooks does not change (because the demand for textbooks is infinitely elastic). Will the group of authors that writes textbooks change? If yes, how? Explain (less than 150 words). No math is necessary here the intuition suffices. F.) G.) The technological change does not represent a Pareto improvement, i.e. there are losers and winners in this economy. Who are the losers and who are the winners? What happens to income inequality among Economic Professors. Explain (less than 200 words). Again, no math is necessary the intuition suffices. This problem illustrates one of the reasons why income inequality has increased at the very top of society in the last 25 years. Please provide an example of an an industry where something similar might have happened during the last few decades. (less than 200 words) You are asked to analyze the market for economic textbooks, in particular the conditions determining the supply of textbooks. A printing house is willing to print the book at a cost of pp per book. To produce a textbook, a publishing house needs to hire an economics professor as an author. There are authors of different quality. Denote the quality of an author by Q. For each quality level, there is only one author available. If an economic professor does not write a textbook and concentrates on teaching and research, she will receive a wage of W₁ The amount of books that a printing house can sell is equal to N(M.Q)-log (MQ), where M denotes marketing inputs whose price is PM. Assume that the price of textbooks is independent of the Quality of the author and is given by pp. A.) B.) C.) D.) E.) Assume that a publishing house hires an author of quality Q and pays him a wage W. Given this choice of quality, please find the cost function for supplying V books to the market. This cost function should be a function C(N, W.PM. PP, Q) - that is, it takes as its arguments the quantity N, the wage W. the prices PM and pp. and the quality of the author Q. (Hint: First find how much M is required to sell N goods if an author of quality Q is hired. Then find the other cost components) It turns out that the optimal quantity of books that a publishing will produce if it hires an author of quality Q is N (Q.PB.PM) = log (P-PEQ). Using this expression, how much will a publishing house be willing to pay an author of quality Q? Now, assume that due to innovations in the use of social media, it becomes easier to market textbooks. Thus, the function N(M,Q) now changes to N(M,Q) = log (2MQ). Another way of representing this change would be to say that the price of the marketing inputs declines by 50%. Assume that the price of the textbook in equilibrium will be unchanged (because the demand for textbooks is infinitely elastic). How would this change affect the wage that a publishing how would be willing to pay an author of quality Q? Assume now that the demand for textbooks is not infinitely elastic. Rather the demand for textbooks slopes downwards? Explain briefly (less than 100 words) - no math is necessary here, the intuition suffices. Now, assume again that the price of textbooks does not change (because the demand for textbooks is infinitely elastic). Will the group of authors that writes textbooks change? If yes, how? Explain (less than 150 words). No math is necessary here the intuition suffices. F.) G.) The technological change does not represent a Pareto improvement, i.e. there are losers and winners in this economy. Who are the losers and who are the winners? What happens to income inequality among Economic Professors. Explain (less than 200 words). Again, no math is necessary the intuition suffices. This problem illustrates one of the reasons why income inequality has increased at the very top of society in the last 25 years. Please provide an example of an an industry where something similar might have happened during the last few decades. (less than 200 words)
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Answer rating: 100% (QA)
A The cost function for supplying N books to the market can be written as follows C N t ilde W p M p B hat Q N t ilde W frac N p M hat Q log M hat Q N ... View the full answer
Related Book For
Operations management processes and supply chain
ISBN: 978-0136065760
9th edition
Authors: Lee J Krajewski, Larry P Ritzman, Manoj K Malhotra
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