# Economics

posted by .

The demand function for a well known economics textbook is:
P = 100 - .005Q
The publisher must pay \$20 per book in printing and distribution costs and, in
addition, it must pay the author a \$20 royalty for each book sold.
(a) Your job is to provide advice to the publisher. What price will maximise
the publisher’s profit? How much profit will the publisher earn? What will
be the total royalty payment earned by the author?
(b) A consultant says that the publisher and the author have the wrong type of
agreement. He says that the author and the publisher should tear up their
original agreement, in which the author gets \$20 per book sold, and enter
into a profit-sharing agreement. He recommends that the author gets 40%
of the profit and the publisher 60%. What price should the publisher set
with this profit-sharing agreement?
(c) Will both the author and the publisher prefer the profit-sharing agreement
to their original agreement? Which agreement will the students who buy
the textbook prefer?
(d) Given the demand and cost conditions indicated above suppose that the
royalty payment was such that the author received a payment which was
15% of sales revenue. Prove that there is an inherent conflict between the
author and the publisher in that the author has an interest in the book’s
price being lower than the price which maximises the publisher’s profit.

Take a shot.

Note that the publisher is a monopolist wrt to the textbook. Always maximize where marginal cost=marginal revenue. So, for each sub-problem, construct a marginal cost and marginal revenue equations.

## Similar Questions

1. ### microeconomics- demand function

hey thanx for "economyst" for his input, he/she was a HUGE help :) just stuck on a dmeand function question p.s. i don't mean to be a nuisence but if you can please, explain each answer, if not tell me wat i should write about Q: a …
2. ### economics

The demand function for a well known economics textbook is: P = 100 - .005Q The publisher must pay \$20 per book in printing and distribution costs and, in addition, it must pay the author a \$20 royalty for each book sold. (a) Your …
3. ### economics

Thank you so much economyst but i do'nt understand the ans for part (b) The demand function for a well known economics textbook is: P = 100 - .005Q The publisher must pay \$20 per book in printing and distribution costs and, in addition, …
4. ### Microeconomics - profit maximisation

Hi, I would really appreciate if someone could help me out on this question! Im not looking to cheat I just want some kind guidance on how to do the question. Ive looked and I honestly don't know! Given the demand function P = 100 …
5. ### Urgent Help Economyst

Hey Economyst can you please help with the following microeconomics question, have tried but getting no where. Q: a demand function for a economics book is P = 100 - 0.005Q the publisher must pay \$20 per book in prinitng and distribution …
6. ### Microeconomics - determining how many to sel

Hi, I would really appreciate it if someone could help me with these questions: An author earns royalties from his book that are specified as 10% of the book's selling price. The demand curve for this is straight and downward sloping. …
7. ### Economics

Hi there, I am having trouble with this problem.Can you give me some guidance. In planning the publication of a new engineering economics textbook, the publisher has identified the following fixed and variable costs. Fixed Costs Overhead- …
8. ### Managerial Economics

Textbook authors typically receive a simple percentage of total revenue generated from book sales. The publisher bears all the production costs and chooses the output level. Suppose the retail price of a book is fixed at \$50. The author …
9. ### math

Three authors team up to write a childrens book. The publisher pays them according to the following contracts Author - Fixed Rate - Royalty Patricia \$3000 - 1n Stephan - \$1500 - 2n Harlan - \$1000 - 3n Find a simplified expression that …
10. ### math

Three authors team up to write a childrens book. The publisher pays them according to the following contracts Author - Fixed Rate - Royalty Patricia \$3000 - 1n Stephan - \$1500 - 2n Harlan - \$1000 - 3n Find a simplified expression that …

More Similar Questions