1. Problems and Applications Q1 A publisher faces the following demand schedule for the next novel from one of its popular authors: Price (Dollars) 100 Quantity Demanded (Copies) 0 90 100,000 80 200,000 70 300,000 60 400,000 50 500,000 40 30 600,000 700,000 800,000 20 10 900,000 0 1,000,000 The author is paid $2 million to write the novel, and the marginal cost of publishing the novel is a constant $10 per copy. Complete the second, fourth, and fifth columns of the following table by computing total revenue, total cost, and profit at each quantity. Quantity Marginal Revenue Total Cost (Copies) (Dollars) (Dollars) (Dollars) (Dollars) Total Revenue Profit 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 Which of the following quantity-price combinations would a profit-maximizing publisher choose? (Note: If the publisher is indifferent between more than one choice, select all of the indifferent combinations.) Check all that apply. 300,000 copies at a price of $70 a $ 400,000 copies at a price of $50 a $60 500,000 copies at a price of $50 600,000 copies at a price of $40 Complete the third column of the previous table by computing marginal revenue. (Hint: Recall that MRT True or False: At each quantity, marginal revenue is less than the price. O True O False Use the black points (plus symbol) to graph the marginal revenue from the 100,000th, 200,000th, 300,000th, 400,000th, 500,000th, and 600,000th , , copy of the novel. Remember to plot from left to right and to plot between integers. For example, if the marginal revenue of increasing production from 100,000 copies to 200,000 copies were 10, then you would plot a point at (150, 10). Next use the orange line (square symbol) to graph the marginal-cost curve faced by the publisher. Finally, use the blue points (circle symbol) to graph demand at the following quantities (in thousands): 0, 100, 200, 300, 400, 500, 600, 700, 800, 900, and 1,000. (? 100 90 80 Marginal Revenue 70 60 Marginal Cost 50 a 40 O 30 Demand 20 10 Deadweight Loss 0 + -10 0 100 900 1000 200 300 300 400 400 500 600 700 800 Quantity (Thousands of copies) The marginal-revenue and marginal-cost curves intersect at a quantity of copies. On the previous graph, use the black triangle (plus symbols) to shade the area representing deadweight loss. If the author were paid $3 million instead of $2 million to write the book, the publisher would novel. the price it charges for a copy of the Suppose the publisher was not profit-maximizing but was concerned with maximizing economic efficiency, and the author of a novel was paid $2 million to write the book. In this case, the publisher would charges for a copy of the novel and earn a profit of S experiences a loss, be sure to enter a negative number for profit.) 1. (Note: If the publisher
