question archive Northeastern Publishing is going to publish Professor Ida Boar's new physics textbook
Northeastern Publishing is going to publish Professor Ida Boar's new physics textbook
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Northeastern Publishing is going to publish Professor Ida Boar's new physics textbook. The firm has agreed to pay the professor ten percent of the total revenue from book sales. Would Prof. Boar wants to produce the same quantity of textbooks and charge the same per-unit price as Northeastern Publishing? Explain your answer.
Hint: What does the professor want to maximize?
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Answer: No
The professor wants to maximize total revenue while Northeastern Publishing wants to maximize profit. This is because the professor is being paid as a percent of total revenue. This means if increasing output will increase total revenue but lower profit, the professor will want that to occur. This is often the case. The total revenue curve often continues to be upward sloping with respect to output when profit reaches its maximum.
