Question
In: Economics
A publisher in a competitive market faces the following cost schedule for publishing a novel by...
A publisher in a competitive market faces the following cost schedule for publishing a novel by one of its authors: the author is paid a $3,000,000 up-front signing bonus to write the book (it is not refundable). The going market price for a hardcover book is $32 per copy. Where Q is the number of books printed and AVC is the average variable cost of producing books at a given Q.
|
AVC |
Q |
|
$0.00 |
0 |
|
$10.000 |
100,000 |
|
$10.666 |
150,000 |
|
$11.326 |
200,000 |
|
$11.993 |
250,000 |
|
$12.660 |
300,000 |
|
$13.327 |
350,000 |
|
$13.994 |
400,000 |
|
$14.661 |
450,000 |
|
$15.328 |
500,000 |
|
$15.995 |
550,000 |
|
$16.662 |
600,000 |
|
$17.329 |
650,000 |
|
$17.996 |
700,000 |
|
$18.663 |
750,000 |
|
$19.330 |
800,000 |
|
$19.997 |
850,000 |
|
$20.664 |
900,000 |
|
$21.331 |
950,000 |
|
$21.998 |
1,000,000 |
|
$22.665 |
1,050,000 |
- Compute total revenue, total cost and profit at each quantity.
- Compute marginal revenue. How does marginal revenue compare to price? Explain.
- Compute marginal cost.
- Is there a quantity where marginal revenue and marginal cost cross? What does this signify? What is the quantity?
- What quantity would a competitive profit maximizing publisher choose?
- If the author were paid $4 million instead of $3 million to write the book, how would this affect the publisher’s decision on what quantity to sell and its profits?
Solutions
Expert Solution
*We are supposed to do only four subparts to a question. For solution to other parts please post as a separate question.
| AVC | Q | TFC | Price | Total Revenue | Total Cost | Profit | Marginal Revenue | Marginal Cost |
| $ - | 0 | $ 30,00,000.00 | $ 30,00,000.00 | |||||
| $ 10.00 | 1,00,000 | $ 30,00,000.00 | 32 | 3200000 | $ 40,00,000.00 | $ -8,00,000.00 | $32.00 | $10.00 |
| $ 10.67 | 1,50,000 | $ 30,00,000.00 | 32 | 4800000 | $ 45,99,900.00 | $ 2,00,100.00 | $32.00 | $12.00 |
| $ 11.33 | 2,00,000 | $ 30,00,000.00 | 32 | 6400000 | $ 52,65,200.00 | $ 11,34,800.00 | $32.00 | $13.31 |
| $ 11.99 | 2,50,000 | $ 30,00,000.00 | 32 | 8000000 | $ 59,98,250.00 | $ 20,01,750.00 | $32.00 | $14.66 |
| $ 12.66 | 3,00,000 | $ 30,00,000.00 | 32 | 9600000 | $ 67,98,000.00 | $ 28,02,000.00 | $32.00 | $16.00 |
| $ 13.27 | 3,50,000 | $ 30,00,000.00 | 32 | 11200000 | $ 76,44,500.00 | $ 35,55,500.00 | $32.00 | $16.93 |
| $ 13.99 | 4,00,000 | $ 30,00,000.00 | 32 | 12800000 | $ 85,97,600.00 | $ 42,02,400.00 | $32.00 | $19.06 |
| $ 14.66 | 4,50,000 | $ 30,00,000.00 | 32 | 14400000 | $ 95,97,450.00 | $ 48,02,550.00 | $32.00 | $20.00 |
| $ 15.33 | 5,00,000 | $ 30,00,000.00 | 32 | 16000000 | $ 1,06,64,000.00 | $ 53,36,000.00 | $32.00 | $21.33 |
| $ 16.00 | 5,50,000 | $ 30,00,000.00 | 32 | 17600000 | $ 1,17,97,250.00 | $ 58,02,750.00 | $32.00 | $22.67 |
| $ 16.66 | 6,00,000 | $ 30,00,000.00 | 32 | 19200000 | $ 1,29,97,200.00 | $ 62,02,800.00 | $32.00 | $24.00 |
| $ 17.33 | 6,50,000 | $ 30,00,000.00 | 32 | 20800000 | $ 1,42,63,850.00 | $ 65,36,150.00 | $32.00 | $25.33 |
| $ 18.00 | 7,00,000 | $ 30,00,000.00 | 32 | 22400000 | $ 1,55,97,200.00 | $ 68,02,800.00 | $32.00 | $26.67 |
| $ 18.66 | 7,50,000 | $ 30,00,000.00 | 32 | 24000000 | $ 1,69,97,250.00 | $ 70,02,750.00 | $32.00 | $28.00 |
| $ 19.33 | 8,00,000 | $ 30,00,000.00 | 32 | 25600000 | $ 1,84,64,000.00 | $ 71,36,000.00 | $32.00 | $29.34 |
| $ 20.00 | 8,50,000 | $ 30,00,000.00 | 32 | 27200000 | $ 1,99,97,450.00 | $ 72,02,550.00 | $32.00 | $30.67 |
| $ 20.66 | 9,00,000 | $ 30,00,000.00 | 32 | 28800000 | $ 2,15,97,600.00 | $ 72,02,400.00 | $32.00 | $32.00 |
| $ 21.33 | 9,50,000 | $ 30,00,000.00 | 32 | 30400000 | $ 2,32,64,450.00 | $ 71,35,550.00 | $32.00 | $33.34 |
| $ 22.00 | 10,00,000 | $ 30,00,000.00 | 32 | 32000000 | $ 2,49,98,000.00 | $ 70,02,000.00 | $32.00 | $34.67 |
| $ 22.67 | 10,50,000 | $ 30,00,000.00 | 32 | 33600000 | $ 2,67,98,250.00 | $ 68,01,750.00 | $32.00 | $36.01 |
| a) Total Revenue = Price *Quantity | ||||||||
| Total Cost = TFC+ AVC*Quantity | ||||||||
| Profit =Total Revenue -Total Cost | ||||||||
| b) Marginal Revenue = ΔTR/ΔQ | ||||||||
| Marginal revenue is equal to price. This implies the market structure is perfect competition. | ||||||||
| c) Marginal Cost = ΔTC/ΔQ | ||||||||
| d) Yes, the marginal revenue and the marginal cost cross at Q = 900,000 | ||||||||
| This signify that profit is at maximum level. | ||||||||
| e) The profit maximizing publisher will choose Q = 900000. | ||||||||
Rahul Sunny answered 1 year agoRelated Solutions
1. Problems and Applications Q1 A publisher faces the following demand schedule for the next novel...
1. Problems and Applications Q1
A publisher faces the following demand schedule for the next
novel from one of its popular authors:
Price
Quantity Demanded
(Dollars)
(Copies)
40
0
36
50,000
32
100,000
28
150,000
24
200,000
20
250,000
16
300,000
12
350,000
8
400,000
4
450,000
0
500,000
The author is paid $800,000 to write the novel, and the marginal
cost of publishing the novel is a constant $4 per copy.
Complete the second, fourth, and fifth columns of...
1. A publisher faces the following demand schedule for the next novel from one of its...
1. A publisher faces the following demand schedule for
the next novel from one of its popular authors:
The author is paid $2 million to write the
book,
Price 100 90 80 70 60 50 40 30 20 10 0
QD(1000s) 0 100 200 300 400 500 600 700 800 900 1000
and the marginal cost of publishing the book is a constant $10
per book.
a. Compute the total revenue, total cost, and profit at
each quantity. What quantity...
Suppose that a firm in a competitive market faces the following revenues and costs:
Table 14-9Suppose that a firm in a competitive market faces the following
revenues and costs:QuantityTotal RevenueTotal Cost0$0$101$9$142$18$193$27$254$36$325$45$406$54$497$63$598$72$709$81$82Refer to Table 14-9. If the firm produces 4 units
of output,a)marginal revenue is less than marginal cost.b)marginal cost is $4.c)the firm is maximizing profit.d)total revenue is greater than variable cost.
Suppose that a firm in a competitive market faces the following revenues and costs:
Suppose that a firm in a competitive market faces the following
revenues and costs:QuantityTotal RevenueTotal Cost0$0$31$7$52$14$83$21$124$28$175$35$236$42$307$49$38A. A competitive firm won’t produce beyond what quantity?
Why?B. What is the marginal cost of the 5th unit?C. How much should the competitive firm produce to maximize
profit?D. What is the profit at the maximizing quantity?
Suppose that a competitive firm faces a market price of $8, an average variable cost of...
Suppose that a competitive firm faces a market price of $8, an
average variable cost of (AVC) or 7, fixed costs of ($400) and is
maximizing their profits by producing 200 units. Will
the firm produce in the short run? Will the firm produce
in the long run?
Assume a competitive firm faces a market price of $60, a cost curve of: C =...
Assume a competitive firm faces a market price of
$60, a cost curve of: C = 0.003q3+ 50q +
1000,
The firm's profit-maximizing output level is ___ units (enter
your response rounded to two decimal places), and the per unit
profit at this output level is $____ (enter your response rounded
to two decimal places—include the minus sign if necessary).
This firm will▼ _______ (shut down or produce) in the
short-run. The firm will realize▼________(economic profit or
economic loss) ,...
A firm is operating in the perfectly competitive market for gummy bears. It faces the following...
A firm is operating in the perfectly competitive market for
gummy bears. It faces the following conditions:
TC(q)=4+ (q2/16 )
MC(q)=q/8
Market Demand: D(P)=1008-200P
Please answer the following questions.
Suppose market price is currently at $2.
a) What is the profit maximizing quantity for the firm to
produce at?
b) What is the profit for the firm at the profit maximizing
quantity?
c) If all firms are identical to this firm, how many firms must
there be in the market?...
A competitive firm faces a market price of $15. The firm has a total cost function...
A competitive firm faces a market price of $15. The firm has a
total cost function equal to TC(q) = 30 + 5q + q2 . What quantity
does the firm produce? What are its profits? Will the firm shut
down in the short run? Explain.
Mattey Publishing Company (Mattey) is a publisher of novels. The monthly equipment maintenance cost for Mattey...
Mattey Publishing Company (Mattey) is a publisher of novels. The
monthly equipment maintenance cost for Mattey is considered to be a
mixed cost. The variable portion of the cost is related to the
number of novels published. The production volume and maintenance
costs for the past six months are presented below. Mattey uses the
high-low method to separate mixed costs into its fixed and variable
portions.
Month
Volume of Production (Number of Novels)
Equipment Maintenance Costs
February
215,000
$5,271
March...
Whitehill Publishing, a publisher of academic textbooks, has made an offer to acquire Yellowtape, a publisher...
Whitehill Publishing, a publisher of academic textbooks, has
made an offer to acquire Yellowtape, a publisher of children’s
books. The management teams at both companies have tentatively
agreed upon a transaction value of Rs 56 per share for Yellowtape
but are presently negotiating alternative methods of payment. Data
used for the analysis of the transaction is given below
Whitehill Publishing
Yellowtape
Pre-merger Stock Price
Rs 80
Rs 48
Number of shares outstanding (millions)
30
20
Pre-merger market value (millions)
Rs...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- K-NN and Perceptron theory question If we don’t care about the size of the TRAINING SET...
- Make a C program that simulates time-sharing in the operating system. Please follow the instructions provided:...
- What are some current challenges faced by food companies in reducing food waste?
- Arthur buys $2,200.00 worth of stock. Six months later, the value of the stock has risen...
- The Following table is based on a time study for a metal working operation Obs (minutes...
- Write a method that returns the percentage of the number of elements that have the value true...
- Jane is the financial manager for Alpha Corporation. She has been asked to perform a lease-versus-purchase...
ADVERTISEMENT