Problem
Suppose that a textbook author is paid a royalty of α share of the revenue from sales where the revenue is R = pq, p is the competitive market price for textbooks, and q is the number of copies of this textbook (which is similar to others on the market) sold. The publisher's cost of printing and distributing the book is C(q). Determine the equilibrium, and compare it to the outcome that maximizes the sum of the payment to the author plus the firm's profit. Answer using both math and a graph. Why do you think royalties are typically based on revenue rather than profit?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.