A Textbook Publisher Is in Monopolistic Competition

question 300

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 publisher advertises, its profit maximizing level of output is

• A) 120 books per day.
• B) 80 books per day.
• C) 160 books per day.
• D) 100 books per day.

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Definitions:

Corporate Stock

Ownership shares in a corporation, representing a claim on part of the corporation's assets and earnings.

Single Corporation

An individual business entity recognized by law as separate from its owners, possessing rights and responsibilities.

Same Industry

Pertains to businesses or entities that operate within the same sector or category of the economy, producing similar goods or services.

Risky

Involving or exposing someone to a possibility of loss or injury.