Professor Kremepuff Has Published a New Textbook

question 4

Multiple Choice

Professor Kremepuff has published a new textbook. This book will be used in classes for two years, at which time it will be replaced by a new edition. The publisher charges a price of $p₁ in the first year and $p₂ in the second year. After the first year, bookstores buy back copies from students for $ and resell them to students in the second year for $p₂. (Students are indifferent between new and used copies.) The cost to a student in the first year of owning the book for a year is therefore $(p₁ - ) . In the first year of publication, the number of students willing to pay $v to own the book for a year is 40,000 - 1,000v. The number of students taking the course in the first year who are willing to pay at least $w to keep the book for reference rather than resell it is 40,000 - 5,000w. In the second year, the number of students who have not previously taken the course and are willing to pay at least $p for a copy of the book is 30,000 - 1,000p. If the publisher sets a price of $p₁ in the first year and $p₂ in the second year, with p₁ B3 p₂, then the total number of copies that the publisher sells over two years will be equal to

• A) 80,000 - 3,000p₂.
• B) 80,000 - 1,000(p₁ -).
• C) 80,000 - 1,000p₁ - 1,000p₂.
• D) 70,000 - 1,000(p₁ +).
• E) 70,000 - 1,500p₂.

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Definitions:

Financing Activities

Transactions related to raising capital and repaying investors, including issuing equity, obtaining loans, and paying dividends.

Cash Flows

The total amount of money being transferred into and out of a business, affecting its liquidity.

Investing Activities

Transactions and events related to the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Cash Flows

The total amount of money being transferred into and out of a business, especially as affecting liquidity.