Suppose that News Corp., which controls the United States’ largest satellite-to-TV broadcaster, is contemplating launching a Spaceway satellite that could provide highspeed Internet service. Prior to launching the Spaceway satellite, suppose that News Corp. used least squares to estimate the regression line of demand for satellite Internet services. The best-fitting results indicate that demand is Qsat d = 152.5 − .8Psat + 1.2 PDSL + .5Pcable (in thousands), where Psat is the price of satellite Internet service, PDSL is the price of DSL Internet service, and Pcable is the price of high-speed cable Internet service. Suppose that after the FCC’s ruling the price of DSL, PDSL, is $25 per month and the monthly price of high-speed cable Internet, Pcable, is $50. Furthermore, News Corp. has identified that its monthly revenues need to be at least $15 million to cover its monthly costs. If News Corp. set its monthly subscription price for satellite Internet service at $55, would its revenue be sufficiently high to cover its cost? Is it possible for News Corp. to cover its cost given the current demand function? Justify your answer.
Suppose that News Corp., which controls the United States’ largest satellite-to-TV
broadcaster, is contemplating launching a Spaceway satellite that could provide highspeed Internet service. Prior to launching the Spaceway satellite, suppose that News
Corp. used least squares to estimate the regression line of
services. The best-fitting results indicate that demand is Qsat
d = 152.5 − .8Psat + 1.2
PDSL + .5Pcable (in thousands), where Psat is the
is the price of DSL Internet service, and Pcable is the price of high-speed cable Internet
service. Suppose that after the FCC’s ruling the price of DSL, PDSL, is $25 per month
and the monthly price of high-speed cable Internet, Pcable, is $50. Furthermore, News
Corp. has identified that its monthly revenues need to be at least $15 million to cover
its monthly costs. If News Corp. set its monthly subscription price for satellite Internet
service at $55, would its revenue be sufficiently high to cover its cost? Is it possible for
News Corp. to cover its cost given the current demand function? Justify your answer.
(LO1, LO2, LO4, LO5)
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