A Textbook Publisher Is in Monopolistic Competition

question 281

Multiple Choice

A textbook publisher is in monopolistic competition. The firm 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. What is the firm's maximum economic profit?

• A) zero
• B) $800
• C) -$400
• D) $1,000

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