Table 18-2 The information in the following table shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16. Quantity Demanded (Internet radio subscriptions) Price (Dollars per subscription per year) 0 64 500 60 1,000 56 1,500 52 2,000 48 2,500 44 3,000 40 3,500 36 4,000 32 4,500 28 5,000 24 5,500 20 6,000 16 6,500 12 7,000 8 7,500 8,000 4 0 Refer to Table 18-2. Assume there are two internet radio providers that operate in this market. If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions, then their agreement will stipulate that O a. each firm will charge a price of $20 and each firm will sell 3,000 subscriptions. ○ b. each firm will charge a price of $40 and each firm will sell 3,000 subscriptions. ○ c. each firm will charge a price of $40 and each firm will sell 1,500 subscriptions. ○ d. each firm will charge a price of $32 and each firm will sell 2,000 subscriptions.
Table 18-2 The information in the following table shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16. Quantity Demanded (Internet radio subscriptions) Price (Dollars per subscription per year) 0 64 500 60 1,000 56 1,500 52 2,000 48 2,500 44 3,000 40 3,500 36 4,000 32 4,500 28 5,000 24 5,500 20 6,000 16 6,500 12 7,000 8 7,500 8,000 4 0 Refer to Table 18-2. Assume there are two internet radio providers that operate in this market. If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions, then their agreement will stipulate that O a. each firm will charge a price of $20 and each firm will sell 3,000 subscriptions. ○ b. each firm will charge a price of $40 and each firm will sell 3,000 subscriptions. ○ c. each firm will charge a price of $40 and each firm will sell 1,500 subscriptions. ○ d. each firm will charge a price of $32 and each firm will sell 2,000 subscriptions.
Chapter6: Elasticities
Section: Chapter Questions
Problem 5P
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Transcribed Image Text:Table 18-2
The information in the following table shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of
$20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.
Quantity Demanded
(Internet radio
subscriptions)
Price
(Dollars per
subscription per year)
0
64
500
60
1,000
56
1,500
52
2,000
48
2,500
44
3,000
40
3,500
36
4,000
32
4,500
28
5,000
24
5,500
20
6,000
16
6,500
12
7,000
8
7,500
8,000
4
0
Refer to Table 18-2. Assume there are two internet radio providers that operate in this market. If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for
subscriptions, then their agreement will stipulate that
O a. each firm will charge a price of $20 and each firm will sell 3,000 subscriptions.
○ b. each firm will charge a price of $40 and each firm will sell 3,000 subscriptions.
○ c. each firm will charge a price of $40 and each firm will sell 1,500 subscriptions.
○ d. each firm will charge a price of $32 and each firm will sell 2,000 subscriptions.
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