The graph to the night depicts the demand for cable subscriptions from a local c
ID: 1202109 • Letter: T
Question
The graph to the night depicts the demand for cable subscriptions from a local cable company along with the average total cost and marginal cost of producing cable subscriptions. Suppose the local cable company is a monopoly. What is the profit-maximizing quantity of cable subscriptions? 42 thousand subscriptions per month. (Enter a numeric response using an integer.) What is the corresponding profit-maximizing price? $ per subscription. (Enter a numeric response using a real number rounded to two decimal places.)Explanation / Answer
1. Profit maximizing quantity is the quantity where MR of firm is equal to the MC of firm. So, equilibrium quantity is 42 thousands.
2. Profit-maximising price is the price where intersection of MR and MC curve meets the demand curve. In the above diagram, intersection of MR and MC curve meets the demand curve at price of $64. Therefore, profit maximizing price is $ 64.
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