The government of Stratospheria is currently inviting investors to bid for the exclusive right to provide cable television service to its residents. The market demand for this service is P=55-0.01Q, where Q is the number of households that would subscribe to the cable service and P is the monthly fee charged to the subscribers. The associated marginal revenue curve is MR=55-0.02Q. Fun Cable Company is interested in bidding for the right to provide cable service in Stratospheria. It has a constant average and marginal cost of RM5 for providing cable service to each household. 2.1) If Fun Cable Company were to be awarded the exclusive right to provide cable service in Stratospheria, how many households would it service? Working calculation: 2.2) If Fun Cable Company were to be awarded the exclusive right to provide cable service in Stratospheria, what price would it charge per household per month? Working calculation: 2.3) If Fun Cable Company were to be awarded the exclusive right to provide cable service in Stratospheria, how much profit would it earn? Working calculation:
The government of Stratospheria is currently inviting investors to bid for the exclusive right to provide cable television service to its residents. The market demand for this service is P=55-0.01Q, where Q is the number of households that would subscribe to the cable service and P is the monthly fee charged to the subscribers. The associated marginal revenue curve is MR=55-0.02Q. Fun Cable Company is interested in bidding for the right to provide cable service in Stratospheria. It has a constant average and marginal cost of RM5 for providing cable service to each household.
2.1) If Fun Cable Company were to be awarded the exclusive right to provide cable service in Stratospheria, how many households would it service?
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2.2) If Fun Cable Company were to be awarded the exclusive right to provide cable service in Stratospheria, what price would it charge per household per month?
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2.3) If Fun Cable Company were to be awarded the exclusive right to provide cable service in Stratospheria, how much profit would it earn?
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2.4) What is the most Fun Cable Company would bid for the franchise?
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2.5) At what level of output (number of households) is Fun Cable Company's total revenue maximized?
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