A Textbook Publisher Is in Monopolistic Competition

question 150

Multiple Choice

A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a day on advertising, it can increase the quantity of books sold at each price by 50 percent. If the firm advertises, its maximum economic profit is

• A) zero.
• B) $800.
• C) $1,200.
• D) -$400.

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Definitions:

Analytical Intelligence

One of the three types of intelligence according to Sternberg's triarchic theory, involving the ability to analyze, evaluate, judge, compare, and contrast information.

IQ Score

A measure of a person's intelligence as indicated by an intelligence test, normalized so that the average score within an age group is 100.

Average IQ

A statistical measure that represents a person's cognitive abilities in relation to the population average, with the population average set at a score of 100.

Broad Average

A general or wide-ranging statistical measure that represents the typical value of a set of numbers or quantities.