Suppose the demand functions facing a wireless telephone monopolist are Qt =90-200P for each low-demand consumer and QH = 160-200P for each high-demand consumer, where Pis the per-minute price in dollars. The marginal cost is $0.02 per minute. Suppose the monopolist offers a menu of two-part tariff plans, with one plan intended for each type of consumer. Suppose too that for any per- minute price PL in the low-demand plan, the fixed fee in the low-demand plan leaves a low-demand consumer with zero surplus; that the number of minutes in the low-demand plan is capped at the number of minutes desired by a low-demand consumer at that plan's per-minute price; and that the high-demand plan has a per-minute price of $0.02 per minute and a fixed fee that leaves the high- demand consumer approximately indifferent between the low- and high-demand plans. Suppose that there are 100 high-demand consumers and 400 low-demand consumers. Will the monopolist's profit be higher when the per-minute price in the low-demand plan is $0.07 or $0.12? Instructions: Round your answers to 2 decimal places as needed. a. Suppose the monopolist's per-minute price in the low-demand plan is $0.07. Profit= $ b. Now suppose the monopolist's per-minute price in the low-demand plan is $0.12. Profit= $
Suppose the demand functions facing a wireless telephone monopolist are Qt =90-200P for each low-demand consumer and QH = 160-200P for each high-demand consumer, where Pis the per-minute price in dollars. The marginal cost is $0.02 per minute. Suppose the monopolist offers a menu of two-part tariff plans, with one plan intended for each type of consumer. Suppose too that for any per- minute price PL in the low-demand plan, the fixed fee in the low-demand plan leaves a low-demand consumer with zero surplus; that the number of minutes in the low-demand plan is capped at the number of minutes desired by a low-demand consumer at that plan's per-minute price; and that the high-demand plan has a per-minute price of $0.02 per minute and a fixed fee that leaves the high- demand consumer approximately indifferent between the low- and high-demand plans. Suppose that there are 100 high-demand consumers and 400 low-demand consumers. Will the monopolist's profit be higher when the per-minute price in the low-demand plan is $0.07 or $0.12? Instructions: Round your answers to 2 decimal places as needed. a. Suppose the monopolist's per-minute price in the low-demand plan is $0.07. Profit= $ b. Now suppose the monopolist's per-minute price in the low-demand plan is $0.12. Profit= $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please answer all blanks correctly for a thumbs up/positive response. I will leave negative feedback for wrong answers as they dont help me learn.
Transcribed Image Text:Suppose the demand functions facing a wireless telephone monopolist are
Q = 90-200P
for each low-demand consumer and
Q= = 160-200P
for each high-demand consumer, where P is the per-minute price in dollars. The marginal cost is $0.02 per minute. Suppose the
monopolist offers a menu of two-part tariff plans, with one plan intended for each type of consumer. Suppose too that for any per-
minute price PL in the low-demand plan, the fixed fee in the low-demand plan leaves a low-demand consumer with zero surplus; that
the number of minutes in the low-demand plan is capped at the number of minutes desired by a low-demand consumer at that plan's
per-minute price; and that the high-demand plan has a per-minute price of $0.02 per minute and a fixed fee that leaves the high-
demand consumer approximately indifferent between the low- and high-demand plans. Suppose that there are 100 high-demand
consumers and 400 low-demand consumers. Will the monopolist's profit be higher when the per-minute price in the low-demand plan
is $0.07 or $0.12?
Instructions: Round your answers to 2 decimal places as needed.
a. Suppose the monopolist's per-minute price in the low-demand plan is $0.07.
Profit = $
b. Now suppose the monopolist's per-minute price in the low-demand plan is $0.12.
Profit = $
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education