A book vendor can produce a book at a constant MC equal to zero, and its potential buyers have the following reservation prices: $55, $50, $45, $40, $35, $30, $25, $20, $15, $10, $5. If the book vendor must announce a take it or leave it price (i.e., he cannot price discriminate), what price maximizes profits?
A)$30
B)$35
C)$25
D)$40

Question

Quizplus · Accepted Answer

The profit-maximizing price is $30. At this price, the book vendor sells 5 books and makes a profit of $150. If the book vendor sets a higher price, he will sell fewer books and make less profit. If the book vendor sets a lower price, he will sell more books but make less profit per book.

A Book Vendor Can Produce a Book at a Constant