The annual demand for the paperback version of previously released books is Q2=800-40P2...

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Question

Shooting Star Books is a small publishing company that specializes in science fiction books.
Like most publishers, Shooting Star releases new books in hardcover form and later releases
paperback versions of the books. The marginal cost of printing both types of books is $2 per book
and Shooting Star maximizes profits by practicing intertemporal price discrimination. The annual
demand for recently released (hardcover) books is Q1=400-10P1, where quantity demanded is
measured in thousands of books and price is measured in dollars per book. The annual demand
for the paperback version of previously released books is Q2=800-40P2
a. What are the marginal revenue curves associated with the two demand curves for books?
b. What are the profit maximizing prices for hardcover and paperback books? What are the
quantities of books demanded at these prices for hardcover and paperback books?
c. Suppose the market demand for paperback books shifts to How does this
change affect the profit maximizing price and quantity in the paperback book market?
d. Does this change affect the profit maximizing outcome in the hardcover book market?

 

Solution ID:350736 | This paper was updated on 26-Nov-2015

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