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 below shows the reservation prices of the eight students enrolled in the class. $$\begin{array} { | c | c | }
\hline \text { Student } & \begin{array} { c }
\text { Reservation Price } \
\text { (\$/Book) }
\end{array} \
\hline \mathrm { Q } & 60 \
\hline \mathrm { R } & 54 \
\hline \mathrm { S } & 48 \
\hline \mathrm { T } & 42 \
\hline \mathrm { U } & 36 \
\hline \mathrm { V } & 30 \
\hline \mathrm { W } & 24 \
\hline \mathrm { X } & 18 \
\hline
\end{array}$$ What price will Campus Books charge if it must charge a single price to all of its customers?

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 below shows the reservation prices of the eight students enrolled in the class. $$\begin{array} { | c | c | } 
\hline \text { Student } & \begin{array} { c } 
\text { Reservation Price } \
\text { (\$/Book) }
\end{array} \
\hline \mathrm { Q } & 60 \
\hline \mathrm { R } & 54 \
\hline \mathrm { S } & 48 \
\hline \mathrm { T } & 42 \
\hline \mathrm { U } & 36 \
\hline \mathrm { V } & 30 \
\hline \mathrm { W } & 24 \
\hline \mathrm { X } & 18 \
\hline
\end{array}$$ What price will Campus Books charge if it must charge a single price to all of its customers?

Quizplus · Accepted Answer

Campus Books will charge $36, as it maximizes profit by setting the price where marginal cost equals marginal revenue. At $36, they sell to five students (Q, R, S, T, U), earning $130 profit (5 books x ($36 - $10)).

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