Table: Willingness-to-Pay for TV Channels (1 pt.; CHOOSE ONE) Nathan Levi Michae

ID: 2495769 • Letter: T

Question

Table: Willingness-to-Pay for TV Channels (1 pt.; CHOOSE ONE)

Nathan Levi Michael

News $40 $20 $75

Sports $25 $10 $10

Food $10 $50 $20

3. Refer to the table above. Assume zero costs.

a. What price would the seller choose for each TV channel if she priced the channels individually? (1 pt.)

b. What price would the seller choose if she bundled all three TV channels in order to maximize profits? (1 pt.)

c. How much more profit does the seller make if she bundles than if she sells the TV channels individually? (1 pt.)

a. News: 20

Sports: 10

Food: 10

b. Bundled price : 40 + 25 + 10 = 75

c. Profit (individual) = 60 + 30 + 30 = 120

Profit (bundle) = 75*3 = 225

Difference = 105

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