Suppose the publisher was not profit-maximizing but was concerned with maximizing economic efficiency, and the author of a novel was paid $2 million to write the book. If the author were paid $3 million instead of $2 million to write the book, the publisher would the price it charges for a copy of the novel. On the previous graph, use the black triangle (plus symbols) to shade the area representing deadweight loss. ? 100 90 80 Marginal Revenue 70 60 Marginal Cost 50 Price 40 30 Demand 20 10 Deadweight Loss 0 -10 0 1 200 300 400 500 600 700 800 Quantity (Thousands of copies) The marginal-revenue and marginal-cost curves intersect at a quantity of copies. Next use the orange line (square symbol) to graph the marginal-cost curve faced by the publisher. For example, if the marginal revenue of increasing production from 100,000 copies to 200,000 copies were 10, then you would plot a point at (150, 10). Remember to plot from left to right and to plot between integers. True False Use the black points (plus symbol) to graph the marginal revenue from the 100,000th, 200,000th, 300,000th, 400,000th, 500,000th, and 600,000th copy of the novel. (Hint: Recall tha MR = ATR.) True or False: At each quantity, marginal revenue is less than the price. 300,000 copies at a price of $70 400,000 copies at a price of $60 500,000 copies at a price of $50 600,000 copies at a price of $40 Complete the third column of the previous table by computing marginal revenue. Which of the following quantity-price combinations would a profit-maximizing publisher choose? (Note: If the publisher is indifferent between more than one choice, select all of the indifferent combinations.) Check all that apply. Complete the second, fourth, and fifth columns of the following table by computing total revenue, total cost, and profit at each quantity. A publisher faces the following demand schedule for the next novel from one of its popular authors: Price (Dollars) 100 90 80 70 60 50 40 30 20 10 0 Quantity Demanded (Copies) 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 The author is paid $2 million to write the novel, and the marginal cost of publishing the novel is a constant $10 per copy.
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