Consider a satellite internet provider which is the only firm servicing potential customersin remote locations of a small country. There are two types of clients: 1,000 big (B) farmsand 5,000 small (S) farms. The provider has no fixed costs and constant marginal cost.The law in the country does not allow the provider to set different prices for the same gooddepending on the identity of the consumer. But the firm can offer a low-bandwidth optionat a discounted price. The table below shows marginal costs for each type of service and thewillingness-to-pay of each customer type for each service.ServiceRegular (R)Low-bandwidth (L)As discussed in lecture, assume that consumers only purchase a service if it maximizes utility(willingness to pay minus price), and only if utility is at least zero. If a consumer is indifferentbetween two options, assume that the firm chooses which one the consumer picks.Marginal cost WTPB WTPS5164106 Which of the following alternatives achieves the highest profits for the monopolist?(a) Offering exclusively the Regular service and only serving the Big farms.(b) Offering exclusively the Regular service and selling to all types of farms.(c) Selling the Regular service to Big farms and the Low-bandwidth service to Smallfarms.

Identify the Objective: The objective of the firm is to maximize profits, which can be represented…

Which of the following alternatives achieves the highest profits for the monopolist? (a) Offering exclusively the Regular service and only serving the Big farms. (b) Offering exclusively the Regular service and selling to all types of farms. (c) Selling the Regular service to Big farms and the Low-bandwidth service to Small farms.

Which of the following alternatives achieves the highest profits for the monopolist? (a) Offering exclusively the Regular service and only serving the Big farms. (b) Offering exclusively the Regular service and selling to all types of farms. (c) Selling the Regular service to Big farms and the Low-bandwidth service to Small farms.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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