1.2 As of June 2014, John Green’s international bestselling novel, The Fault in Our Stars, had sold more than 10.7 million copies. In book publishing, fixed costs are high and marginal costs are low and fairly constant. Suppose that the fixed cost of producing The Fault in Our Stars is

$4 million. What is the average fixed cost if the publisher produces 1 million copies? 5 million copies? 15 million copies? Now suppose that the marginal cost of the print version of The Fault in Our Stars is $2.50 per book and is the same for each book up to 20 million copies. Assume that this includes all variable costs. Explain why in this case marginal cost (MC) is a horizontal line, as is average variable cost (AVC). What is the average total cost of the book if the publisher produces 1 million copies? 5 million copies?

15 million copies?

Sketch the average fixed cost (AFC) curve and the average total cost (ATC) curve facing the publisher.