July 23, 2007 LONDON (Reuters)—The final volume of the Harry Potter saga sold more than 11 million copies in the first 24 hours it went on sale in the United States and Britain to become the fastestselling book in history, publishers said. In book publishing, fixed costs are very high and marginal costs are very low and fairly constant. Suppose that the fixed cost of producing the new Harry Potter volume is $30 million. What is the average fixed cost if the publisher produces 5 million copies? 10 million copies? 20 million copies?

Now suppose that the marginal cost of a Harry Potter book is

$1.50 per book and is the same for each book up to 40 million copies. Assume that this includes all variable costs. Explain why in this case marginal cost is a horizontal line, as is average variable cost. What is the average total cost of the book if the publisher produces 5 million copies? 10 million copies? 20 million copies?

Sketch the average fixed cost curve and the average total cost curve facing the publisher.