All book buyers have the same preferences, and under current arrangements, those who buy

used books at $22 receive the same utility as those who buy new books at $50. The annual

interest rate is 10 percent, and there are no transaction costs involved in the buying and selling of

used books. Each new textbook costs $m to produce and lasts for exactly 2 years.

a. What is the most a buyer would pay for the use of a new book for 1 yr?

b. How low would m have to be before a publisher would find it worthwhile to print books with

disappearing inkink that vanishes 1 yr from the point of sale of a new book, thus eliminating

the used-book market? (Assume that eliminating the used-book market will exactly double the

publisher's sales.)