Suppose Campus Books, a profit-maximizing firm, is the only supplier of the textbook for a given class. The marginal cost of supplying each book is constant and equal to $10, and Campus Books has no fixed costs. The table shows the reservation prices of the eight students enrolled in the class.
$$\begin{array} { | c | c | }
\hline \text { Custamer } & \begin{array} { c }
\text { Reservutian Price } \
\text { (S/Bank) }
\end{array} \
\hline \mathrm { Q } & 60 \
\hline \mathrm { R } & 54 \
\hline \mathrm { S } & 48 \
\hline \mathrm { T } & 42 \
\hline \mathrm { U } & 36 \
\hline \mathrm { V } & 30 \
\hline \mathrm { W } & 24 \
\hline \mathrm { X } & 18 \
\hline
\end{array}$$ What price will Campus Books charge if it must charge a single price to all of its customers?
A)$36
B)$18
C)$24
D)$10

Question

Suppose Campus Books, a profit-maximizing firm, is the only supplier of the textbook for a given class. The marginal cost of supplying each book is constant and equal to $10, and Campus Books has no fixed costs. The table shows the reservation prices of the eight students enrolled in the class.  
$$\begin{array} { | c | c | } 
\hline \text { Custamer } & \begin{array} { c } 
\text { Reservutian Price } \
\text { (S/Bank) }
\end{array} \
\hline \mathrm { Q } & 60 \
\hline \mathrm { R } & 54 \
\hline \mathrm { S } & 48 \
\hline \mathrm { T } & 42 \
\hline \mathrm { U } & 36 \
\hline \mathrm { V } & 30 \
\hline \mathrm { W } & 24 \
\hline \mathrm { X } & 18 \
\hline
\end{array}$$ What price will Campus Books charge if it must charge a single price to all of its customers?
A)$36
B)$18
C)$24
D)$10

Quizplus · Accepted Answer

To maximize profits, Campus Books will set a price where marginal revenue equals marginal cost, considering the reservation prices of the customers. Charging more than $36 would result in selling fewer books, as fewer students are willing to pay more than $36. Charging less than $36 would increase sales but at a lower margin that doesn't cover the additional cost for each book sold beyond the fifth student. At $36, they sell to five students (Q, R, S, T, U), covering the marginal cost of $10 and maximizing profit by setting the price equal to the highest reservation price that allows them to sell the greatest number of books while covering costs.

Suppose Campus Books, a Profit-Maximizing Firm, Is the Only Supplier