Microeconomics

posted by .

I am on the chapter for monoplies.

I need to calculate the total cost for the following question. I am not quite clear if I am to use the $2 million that was paid to author to write the book to calculate the total cost, since the question is stating that the marginal cost has been a constant $10 per book?

Question:

A publisher faces the following demand schedule for the next novel of 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
$30---------700,000
$20---------800,000
$10---------900,000
$0--------1,000,000

The author is paid $2 million to wirte the book, and the marginal cost of publishing the book is a constant $10 per book

Compute total revenue, total cost, and profit at each quantity.

  • Microeconomics -

    The $2M paid to the author, in this example problem, is a fixed cost. Let Q be quantity, P be price. Then:
    TR = P*Q
    TC = 10.*Q + 2,000,000
    Profit = TR-TC

  • Microeconomics -

    I am puzzled by the use of 'marginal cost' as it is usually defined as the change in total cost that arises when the quantity produced changes by one unit. (It could be here the step change between the bands?) I would have thought that the marginal cost would have been a small value for a book.

    I would think you would need to use the money paid to the author as this will be an out going against the project.

    The function for marginal cost is usually such that the total cost is a 'U' shape curve so that at low volumes the overall cost decreases as the number of items increases and then increases at much higher volumes.

    Post your answer (you will need to use a spread sheet) and we will take a look.

  • Microeconomics -

    Thank you for your response.

    Do you know the best way I could post a spread sheet on Jishka for you to review?

  • Microeconomics -

    Dr Russ.

    The marginal cost for a book in this problem is given at $10 per book. Rather high in today's publishing world, but its a nice round number. You are correct, marginal costs are generally not flat. But in this learning example, they are flat. Which means average variable cost=marginal cost. BTW, the U shape curve you refer is average costs, not total costs.

    G:

    I know of now easy way of posting a spreadsheet or pasting spreadsheet values on Jishka.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. 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. …
  2. Microeconomics

    I put this question on the board before. What I am not clear on is if I should consider the $2 million once when I doing the calculations?
  3. economics

    Calculate the mid-point elasticity of demand. Please review chapter 6 before taking this assignment. Question: The online bookseller wants to increase its total revenue by offering 10% discount on every book it sells.Its custmers are …
  4. economics

    Calculate the mid-point elasticity of demand. Please review chapter 6 before taking this assignment. Question: The online bookseller wants to increase its total revenue by offering 10% discount on every book it sells.Its custmers are …
  5. MATH

    The life cycle cost of the BLUEBIRD system is $600 million. The program acquisition cost is $400 million and the development cost is $150 million. There are no facilities costs. What is the procurement cost of the BLUEBIRD system?
  6. math

    Your program has an RDT&E-funded project scheduled to start in July 2005 which is expected to take 12 months to complete. The project is expected to cost a total of $12 million (then-year dollars), with cost expected to be incurred …
  7. statistics

    The program plans to acquire a total of 600 end items costing $570 million over a five-year period. The first production contract is to be awarded in FY04. The number of items to be procured (not delivered) each year and their estimated …
  8. statistics

    Your program has an RDT&E-funded project scheduled to start in July 2005 which is expected to take 12 months to complete. The project is expected to cost a total of $12 million (then-year dollars), with cost expected to be incurred …
  9. History

    hi, i really need help with this question you don't need to tell me the answer but please just help me out!!! Which of the following best describes the terms of the Treaty of Guadalupe-Hidalgo?

More Similar Questions