Name:________________________________
Economics 121 A & B
Fall 1996 - Prof. Becker
When professors have a textbook published, they receive
a royalty payment from the publisher of $1.00 for each textbook
sold. This royalty is included in the publisher's costs of producing
textbooks.
Three professors have just completed an economics textbook. There are some similar textbooks available, but none exactly like theirs. Their publisher's marginal cost is a constant $20 per book. Demand for the book is shown in the graph as is marginal revenue and the publisher's marginal cost and average total cost.
(a) What price will the publisher select for the
textbook? How many will be sold?
(b) What price and quantity would the professors
suggest the publisher choose?
(c) What is the allocatively efficient price and
quantity? Why is it not feasible?