Question: this is from a homework assignment that i have already done but i got it wrong and he hasn't explained how to solve it. I
this is from a homework assignment that i have already done but i got it wrong and he hasn't explained how to solve it. I mostly just need help understanding how to find marginal cost

26. BowDark is a suburb of Springfield, and its residents currently receive no internet service. The only provider of internet service in southwest Missouri, Media Conglomerate, currently serves 2000 subscribers in Springfield who each pay $50 per month for internet. The company is considering expanding its service to BowDark, and the company has determined that 100 BowDark households would purchase internet service if the price were reduced to $48 per month. The firm can't engage in price discrimination, so the lower price would apply to all subscribers in both communities. The firm's average variable cost at its current level of service is $35 per customer. It anticipates that its average variable cost will fall to $34 if it increases service to 2100 households from its current level of 2000. a. Assuming the firm wants to maximize its profits, do you think Media Conglomerate would cut its monthly fee to $48 and expand service by 100 households in BowDark? Why or why not? Use marginal revenue and marginal cost to answer this question and be sure to show your work. (8) b. How much is internet service worth to the 100 households in Bowdark? Please be specific. (2) c. How much would it cost to expand internet service to Bowdark? Please be specific. (2) d. Did the firm's decision that you explained in question (a) above promote efficiency in the allocation of resources? Why or why not? (3) e. Suppose Media Conglomerate could practice price discrimination in the situation described above. Would the company profit if it provided additional service to Bowdark at a price of $48 if the firm could do so without reducing the price to Springfield customers? Why or why not? Please use marginal revenue and marginal cost to explain your reasoning
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
