A publisher faces the following demand schedule for the next novel from one of its popular authors: Price Quantity Demanded 100 0 90 100,000 80 200,000 70 300,000 60 400,000 50 500,000 40 600,000 5 30 700,000 20 800,000 10 900,000 0 1,000,000 The author is paid $2 million to write the book, and the marginal cost of publishing the book is a constant $30 per book. d. In your graph, shade in the deadweight loss. Explain in words what this means. e. If the author was paid $3 million instead of $2 million to write the book, how would this affect the publisher’s decision regarding the price to charge? Explain. f. Suppose the publisher was not profit-maximizing but was concerned with maximizing economic efficiency. What price would it charge for the book? How much profit would it make at this price? (
A publisher faces the following demand schedule for the next novel from one of its popular authors:
Price Quantity Demanded
100 0
90 100,000
80 200,000
70 300,000
60 400,000
50 500,000
40 600,000
5
30 700,000
20 800,000
10 900,000
0 1,000,000
The author is paid $2 million to write the book, and the marginal cost of publishing the book is a constant $30 per book.
d. In your graph, shade in the
e. If the author was paid $3 million instead of $2 million to write the book, how would this affect
the publisher’s decision regarding the price to charge? Explain.
f. Suppose the publisher was not profit-maximizing but was concerned with maximizing economic
efficiency. What price would it charge for the book? How much profit would it make at this
price? (
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