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Marginal Cost of E-Books

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Consider the preferred prices of the authors and publishers of an electronic book, whose marginal cost of production is close to zero? Would the two disagree about the price to be charged for the book?

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Solution Summary

Uses e-books to illustrate the concept of marginal cost through the perspective of both authors and publishers.

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An author would almost certainly disagree with publishers of electronic format books. To an author, significant effort is expended in creating the content of an e-book. This represents a significant outlay of value (in the form of time), and the author likely expects significant compensation for such an investment. How much compensation- for a rational author- depends on the demand ...

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