Reference no: EM131704705

Professor Logan has just written a textbook in Intermediate Economics. Market research suggests that the demand curve for this book will be Q = 32,000 - 160P, where P is its price and Q denotes the quantity of books sold. It will cost the publisher $3,000 to set the book in type. This setup cost is necessary before any copies can be printed. In addition to the setup cost, there is a marginal cost of $10 per book for every book printed. If the publisher is interested in maximizing profit, what price should it charge for Professor Johnson's book? How many books will be sold at that price? Calculate the publisher's profit and total consumer surplus at this price. What price maximizes the Gains from Trade? How many books are sold at this price? Calculate the publisher's profit and consumer surplus at this price. What is the dead weight loss from monopoly pricing? Finally, suppose that the Professor is paid a royalty every time a book is sold - he gets 15% of the selling price. If the Professor could set the price of the book, what price would he choose? Explain.