Q1. Textbook writers typically receive a simple percentage of total revenue generated from book sales. The publisher bears all the production costs and chooses the output level. Suppose the retail price of a book is fixed at $50. The author receives $10 per copy, and the firm receives $40 per copy. The firm is interested in maximizing its own profits. Will the author be happy with the book company's output choice? Does the selected output maximize the joint profits (for both the author and company) from the book?

Writer’s Perspective:
Ideally the writer would choose a publisher for his book who is already established in the market. This implies that the writer transfers the responsibility and the right of printing, holding copyrights, marketing, and most importantly the pricing and the supply of the book to the publisher. Assuming that the writer gets 20% of the total price of the book, his profit is directly proportional to the volume of sales the publishing press makes. Therefore, it is in the interest of the writer that the publisher prints maximum books possible.
Publisher’s Perspective:
The Publishing firm like any other business operates for profit and profit maximization is its top most priority. A successful publisher should be able to demonstrate both economies of scale and economies of scope. Keeping in mind that it incurs fixed and variable costs in the short and long run, it works for the publisher to print maximum possible books. To determine the maximum point, it should operate to achieve increasing returns to scale till a maximum point before receiving diminishing returns. Therefore, its marginal revenue should be equal to its marginal cost in order to benefit from the increasing output.
Given the business model of the publishing press, the writer should be satisfied with the output choice of the publisher. The higher proportion of profit (80%)