The information in the table below shows the total demand for premium-channel di
ID: 1159215 • Letter: T
Question
The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $100,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero. Quantity 1,500 3,000 4,500 6,000 7,500 9,000 10,500 12,000 13,500 15,000 16,500 18,000 Price (per year) $120 $110 $100 $90 $ 80 $70 $ 60 $50 $ 40 $30 $ 20 $10 $0 essos Assume that there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are able to collude on the price and quantity of premium digital channel subscriptions to sell. As part of their collusive agreement they decide to take an equal share of the market. How much profit will each company make? $40,000 $170,000 $480,000 d. $540,000 Assume that there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell. How much profit will each firm earn when this market reaches a Nash equilibrium? a. So $140,000 $170,000 $220,000 déosExplanation / Answer
4.
B
As per the above tabular data, profit per company is maximized when they collude together. It happens at the level of output of 9000 tickets and profit per company is $170000.
5.
B
This is the profit level for each company when the Nash equilibrium is achieved in the market.
Quantity Price Joint profit = revenue - 2* fixed cost per company Profit per company 0 120 -200000 -100000 1500 110 -35000 -17500 3000 100 100000 50000 4500 90 205000 102500 6000 80 280000 140000 7500 70 325000 162500 9000 60 340000 170000 10500 50 325000 162500 12000 40 280000 140000 13500 30 205000 102500 15000 20 100000 50000 16500 10 -35000 -17500 18000 0 -200000 -100000Related Questions
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