Question: Suppose the demand functions facing the wireless telephone monopolist in Worked-Out Problem 18.4 are instead QdL = 40 - 100P for each low-demand consumer and
Suppose the demand functions facing the wireless telephone monopolist in Worked-Out Problem 18.4 are instead QdL = 40 - 100P for each low-demand consumer and QdH = 120 - 100P for each high-demand consumer, where P is the per-minute price in dollars. The marginal cost is $0.10 per minute. Suppose the monopolist offers only a single two-part tariff. What will be the monopolist's profit from each type of consumer if it charges a per-minute price of $0.10 and a fixed fee that causes both types of consumers to make a purchase? What if it charges a per-minute price of $0.20? If there are 100 high-demand consumers, how many low-demand consumers can there be for the monopolist to find the $0.20 per-minute price more profitable?
Step by Step Solution
3.49 Rating (169 Votes )
There are 3 Steps involved in it
If it charges a perminute price of 010 and a fixed fee that causes both types of consumers to make a purchase Profit low 450 Profit high 450 If it cha... View full answer
Get step-by-step solutions from verified subject matter experts
Document Format (1 attachment)
847-B-E-D-S (2990).docx
120 KBs Word File
