Answered: annel N T ney Channel Subscriber per…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Review the following hypothetical scenario and answer the following question:

A number of groups have put pressure on the FCC to mandate that cable companies offer their channels à la carte rather than in bundles. We are opposed to this measure and will continue to strive to provide channels in bundled tiers. However, we want to be prepared in case we need to offer single-channel pricing.

Using existing market research, we were able to calculate an estimated own-price elasticity of demand for a number of our most popular cable channels. Use this information, along with the marginal cost for each channel, to calculate the profit-maximizing price for each of these channels.

Channel
ESPN
TNT
Disney Channel
Fox News
MSNBC
CNN
Programming
Cost per
Subscriber per
Month
$6.15
$1.52
$1.25
$1.05
$0.99
$0.87
Estimated Own
Price Elasticity of
Demand
-1.8
-2.1
-1.6
-1.9
-2.4
-3.4
Subscription
Price

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