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 prepare the book and the marginal cost or publishing the book is a constant $10 per book.

a. Compute total revenue, total cost, and profit at each quantity. What quantity would a profit-maximizing publisher choose? What price would it charge?

b. Compute marginal revenue. How does marginal revenue compare to the price? describe.

c. Graph the marginal-revenue, marginal-cost, and demand curves. At what quantity do the marginal-revenue and marginal-cost curves cross? What does this signify?

d. In your graph shade in the deadweight loss. describe in words what this means.

e. If the author was paid $3 million instead of $2 million to prepare the book, how would this affect the publisher's decision regarding the price to charge? describe.

f. Suppose the publisher was not profit-maximizing but was concerned with maximizing economic efficiency. What price would it charge for the book? How much profit would it make at this price?