A hardback book publisher has just released an exciting political thriller that is likely to be a best-seller. The book's marginal cost (including printing, shipping, author royalty, and so on) is $8 per book, and its projected demand curve is: P = 28 - .4Q, where Q denotes monthly sales (in thousands) of books. (In short, Q = 20 means 20 thousand books.)

1. Determine the publisher's profit-maximizing output and price for the best-seller. Your answer must clearly show the revenue function (1 point), MR (1 point), and the optimal price (1 point) and quantity (1 point)
2. At this chosen price, suppose that the price elasticity of demand turns out to be E_P = -2. Would this lead the publisher to change its price? If so, to what? 2 points
3. The publisher plans to sell foreign editions of the best seller for $20 in Western Europe, $14 in Taiwan, and $11 in India. How might the publisher profit from this pricing strategy? (A qualitative answer is sufficient.) 2 points
4. The publisher expected Amazon to sell the corresponding e-book at a $14 price; instead, Amazon has chosen to release the e-book at $10. In light of this development, how should the publisher adjust its pricing strategy for the hardback bestseller (relative to part a)? (A qualitative answer is sufficient.) 2 points