The information in the table show the total demand forpremium-channel digital ca
ID: 1253566 • Letter: T
Question
The information in the table show the total demand forpremium-channel digital cable TV subscriptions in a small urbanmarket. Assume that each digital cable TV operator pays a fixedcost of $100,00 (per year) to provide premium channels in themarket area nad that the marginal cost of providing thepremium-channels in the market area and that the marginal cost ofproviding the premium-channel service to a household is zero. 1. Assume that there are two digital cable TV companiesoperating in this market. If they are able to collude on the priceand quantity of subscriptions to sell, what price (P) will theycharge, and how many subscriptions (Q) will they sellcollectively? a. P=$40, Q= 12,000 b. P=$60, Q= 9,000 c. P=$80, Q= 6,000 d. P=$100, Q=3,000 2. Assume that there are two profit-maximizing digital cableTV companies operating in this market. Further assume that they arenot able to collude on the price and quantity of premium-channeldifital subscriptions to sell. How many premium-channel digitalcable TV subscriptions will be sold altogether when this marketreaches a Nash equilibrium? a. 3,000 b. 6,000 c. 9,000 d. 12,000Explanation / Answer
1. B , P = $ 60, Q = $ 9,000 2. D 12,000
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