Professor Kremepuff's New, User-Friendly Textbook Has Just Been Published

question 11

Multiple Choice

Professor Kremepuff's new, user-friendly textbook has just been published.This book will be used in classes for two years, after which 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 used copies for p₂/2 and resell them to students in the second year for p₂.(Students are indifferent between new and used copies.) The cost to a student of owning the book during the first year is therefore p₁ - p₂/2.In the first year of publication, the number of students willing to pay $v to own a copy of the book for a year is 60,000 - 500v.The number of students taking the course in the first year who are willing to pay $w to keep the book for reference rather than sell it at the end of the year is 60,000 - 2,500w.The number of persons who are taking the course in the second year and are willing to pay at least $p for a copy of the book is 40,000 - 500p.If the publisher sets a price of p₁ in the first year and p₂ <= p₁ in the second year, then the total number of copies of the book that the publisher sells over the two years will be

• A)120,000 - 1,500p₂.
• B)120,000 - 500p₁ - 500p₂.
• C)120,000 - 500(p₁ - p₂ /2).
• D)100,000 - 500(p₁ + p₂ /2).
• E)100,000 - 750p₂.

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Definitions:

Cardinal Utility Functions

Utilize numerical values to represent the level of satisfaction or utility that consumers derive from different bundles of goods and services.

Ordinal Utility Functions

A representation of a consumer's preference ranking for different bundles of goods, without specifying the exact level of satisfaction.

Basic Assumptions

Foundational beliefs or principles that are accepted as true without proof, forming the basis of further argument or reasoning.

Indifference Curve

A graph showing different combinations of two goods that provide equal satisfaction and utility to a consumer.