In many areas (including sections of New York City) cable TV service is provided by a single producer. The graph below depicts the demand for monthly cable TV in one such town, Little Apple. BurnU Cable is the sole provider of cable services in Little Apple. Its monthly costs of providing services to a household are constant at $10 per household. In addition, the annual cost of maintaining the overall system of cables is $2,000. $ 110 100 90 80 70 60 50 40 30 20 10 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 Households А. How many households will purchase cable TV services and at what price? Quantity: Price: В. The mayor of Little Apple is interested in lowering the cost of cable TV and has proposed regulating the price at $30. His summer intern (all the way from Wagner) recalls that regulation causes inefficiency and argues against this strategy. Is the intern correct? O Yes O No What are the efficiency consequences of imposing the price regulation of $30 in this market? Use your graph to explain: Enthralled with this concern for efficiency, the Mayor reads some economic blogs and decides to set the price charged by BurnU Cable equal to marginal cost ($10). Explain the efficiency consequences of this decision, as compared to the unregulated price in part A. С.
In many areas (including sections of New York City) cable TV service is provided by a single producer. The graph below depicts the demand for monthly cable TV in one such town, Little Apple. BurnU Cable is the sole provider of cable services in Little Apple. Its monthly costs of providing services to a household are constant at $10 per household. In addition, the annual cost of maintaining the overall system of cables is $2,000. $ 110 100 90 80 70 60 50 40 30 20 10 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 Households А. How many households will purchase cable TV services and at what price? Quantity: Price: В. The mayor of Little Apple is interested in lowering the cost of cable TV and has proposed regulating the price at $30. His summer intern (all the way from Wagner) recalls that regulation causes inefficiency and argues against this strategy. Is the intern correct? O Yes O No What are the efficiency consequences of imposing the price regulation of $30 in this market? Use your graph to explain: Enthralled with this concern for efficiency, the Mayor reads some economic blogs and decides to set the price charged by BurnU Cable equal to marginal cost ($10). Explain the efficiency consequences of this decision, as compared to the unregulated price in part A. С.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:In many areas (including sections of New York City) cable TV service is provided by a single
producer. The graph below depicts the demand for monthly cable TV in one such town, Little
Apple. BurnU Cable is the sole provider of cable services in Little Apple. Its monthly costs of
providing services to a household are constant at $10 per household. In addition, the annual cost
of maintaining the overall system of cables is $2,000.
110
100
90
80
70
60
50
40
30
20
10
10 20
30
40
50 60
70 80
90 100 110 120 130 140 150 160 170 180 190 200 210
Households
A.
How many households will purchase cable TV services and at what price?
Quantity:
Price:
В.
The mayor of Little Apple is interested in lowering the cost of cable TV and has proposed
regulating the price at $30. His summer intern (all the way from Wagner) recalls that
regulation causes inefficiency and argues against this strategy. Is the intern correct?
O Yes
O No
What are the efficiency consequences of imposing the price regulation of $30 in this market?
Use your graph to explain:
Enthralled with this concern for efficiency, the Mayor reads some economic blogs and
decides to set the price charged by BurnU Cable equal to marginal cost ($10). Explain the
efficiency consequences of this decision, as compared to the unregulated price in part A.
С.
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