A firm is considering a two-way network that links 12 users. The cost of buildin

Question

A firm is considering a two-way network that links 12 users. The cost of building the network is $9,000.

a. How many potential connection services does this network provide? connection services

b. If each user is willing to pay $100 to connect to the network, will the firm profit by building the network? (select one )Yes or No

c. If each user is willing to pay an average of $9 for each potential connection service provided by the network, will the firm profit by building the network? (select one )No or Yes

d. What is the increase in the number of potential connection services if one additional user joins the network? connection services

Explanation / Answer

a). Solution :- Number of potential connection services = 12 * (12 - 1).

= 12 * 11

= 132.

b). Answer :- No.

c). Answer :- Yes.

d). Solution :- Number of potential connection services (after joining of one additional user) = 13 * (13 - 1)

= 13 * 12

= 156.

Increase in number of potential connection services = 156 - 132

= 24.

Conclusion :- Increase in number of potential connection services = 24.

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