Industry insiders say consumers could be aware that book prices are unlikely to be as good again and are stocking up. It is understood that the Publishers Association has failed in an attempt to retain the legal framework of the NBA so it can be revived if the current discount frenzy results in an industry bloodbath. The article implies the profits of publishers will suffer. Explain why this may be related to the large discounts they are forced to make to the multi-outlet retailers and to the declining sales of the small retailers. The article suggests publishers will raise prices on academic titles to compensate both themselves and small retailers.
All parts carry equal marks.
Distinguish between avoidable and unavoidable costs. Explain, using examples of different types of unavoidable cost, why unavoidable costs are irrelevant when assessing an option, and why whether a particular cost item is unavoidable can depend on the type of option being assessed. Explain the behaviour of average total cost, average variable cost and marginal cost when output is varied from a given plant. Why does a plant need to cover the opportunity cost of its physical capital and, in the long-run, the opportunity cost of the financial capital needed to replace it. All parts carry equal marks.