. A publisher faces the following demand schedule for Price Quantity Demanded the next novel from one of its popular authors: 40 600.000 Price Quantity Demanded 30 700.000 $ 100 0 novels 20 800,000 90 100,000 10 900.000 80 200.000 0 1,000,000 70 300.000 The author is paid $2 million to write the book, and 60 400,000 the marginal cost of publishing the book is a constan 50 500000 $10 per book. a. Compute total revenue, total cost, and profit at each quantity. What quantity would a profit- maximizing publisher choose? What price would it charge? . Compute marginal revenue. (Recall that MR = ATR/AQ.) How does marginal revenue compare to the price? Explain. . Graph the marginalrevenue, marginal-cost, and demand curves. At what quantity do the marginal-revenue and marginal-cost curves cross? What does this signify? . In your graph, shade in the deadweight loss. Explain in words what this means. e. If the author were paid $3 million instead of $2 million to write the book, how would this affect the publisher's decision regarding what price to charge? Explain. Suppose the publisher was not profit-maximizing but was instead concerned with maximizing economic efficiency. What price would it charge for the book? How much profit would it make at this price? 12. Who is the Decision Maker in this problem? The publisher The author The reader The government Barack Obama l3. What quantity would a prot-maximizing publisher choose? 0 I00'000 200,000 300,000 400,000 500,000 (100,000 700,000 800,000 l000.000 imilliott l4. What price would a profit-maximizing publisher charge? 0 10 20 30 40 50 60 T0 80 90 100 l 10 [20 IS. Is MR higher than, equal to, or lower than the price {for most quantities)'.' Higher Than Equal To Lower Than I6. Why? a. Firm must lower price on all units of the good when it produces more b. Firm has lousy distribution network c. Firm faces increased competition as it produces more IT. At what quantity do the MR and MC curves cross? 0 l00,000 200,000 300,000 400,000 500,000 600,000 T00,000 800,000 900.000 imillion I8. What does this intersection signify? Where revenues are maximized Where prots are maximized Where costs are maximized l9. Where is the deadweight loss on your graph? The area right of the MR curve but under the demand curve below the price but above the MR curve below the price but above the MC curve under the demand curve, above the MC curve, and right ofthe equilibrium quantity below the demand curve but above the x-axis era-cg. 20. Why is there a DWL? a. some books are produced by an inferior producer b. some books are not produced that would have benefited consumers c. there is a tax more than the MC of production d- too many books are produced 21. If the author were paid $3 million instead of $2 million to write the book, what price would the publisher sell for? Same price Higher price, but we can't say how much higher Lower price 22. lfthe author were paid $3 million instead of $2 million to write the book, what quantity,r of books would the publisher sell? Same quantity as before Higher quantity Lower quantity 23. What prot would the publisher make if the author made $3 million? 3-2 million $0 $6 million 312 million $16million $17 million $18 million $20 million $24 million 24. Suppose the publisher were concerned with maximizing economic efciency (in the form of T.S.). What price a publisher interested in maximizing total surplus charge? $0 10 20 30 40 50 60 370 80 90 100 110 120 25. What prot would a publisher interested in maximizing economic efciency (total surplus) make? 3-2 million $0 $6 million 512 million $16mi|lion $17 million $18 million $20 million $24 million