An author has signed a contract in which the publisher promises to pay her $10,000 plus 20 percent of gross receipts from the sale of her book. True or false: If both the publisher and the author care only about their own financial return from the project, then the author will prefer a higher book price than will the publisher.

It is evident from the diagram -please check the attached image to the exercise- that the author wants to set a lower price than the publisher (to sell the higher quantity) .

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dubeyshailja64 dubeyshailja64 · Answer 2 · 2022-02-16T14:09:56+01:00

A contract can be said as an agreement that derives its enforceability by law.

The statement "If both the publisher and the author care only about their own financial return from the project, then the author will prefer a higher book price than will the publisher" is FALSE.

What is a promise in a contract?

When one party signifies its assent to the other party to perform the obligation it is said to be a promise. However, when two persons or two parties agree to perform the obligations for consideration then it becomes an agreement.

What is the financial return?

The financial return is nothing but the profits generated in terms of money by selling a product or by rendering a service.

Here, if the author and publisher only care about their individual financial return, in that case, the author will never agree to the deal of $10,000 and 20% of the sale proceeds.

The author has done all the hard work and any rational person will never settle just for a 20% share of the sales proceeds of their own creation.

Therefore, the statement "If both the publisher and the author care only about their own financial return from the project, then the author will prefer a higher book price than will the publisher" is FALSE.

Learn more about Financial Return here:

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