Pretend your company won a license to build a U.S. cellular system (the application cost for thelicense was only $500!). Your license is to cover 140 square km. ASsume a base station costs$500,000 and a MTSO costs $1,500,000. An extra $500,000 is needed to advertise and start thebusiness. You have convinced the bank to loan you $6 million, with the idea that in four years youwill have earned S10 million in gross billing revenues, and will have paid off the loan.(a) How many base stations (i.e., cell sites) will you be able to install for $6 million?(b) Assuming the earth is flat and subscribers are uniformly distributed on the ground, whatassumption can you make about the coverage area of each of your cell sites? What is the majorradius of each of your cells, assuming a hexagonal mosaic?(c) Assume that the average customer will pay $50 per month over a four-year period. Assume thaton the first day you turn your system on, you have a certain number of customers which remainsfixed throughout the year. On the first day of each new year, the number of customers using yoursystem doubles and then remains fixed for the rest of that year. What is the minimum number ofcustomers you must have on the first day of service in order to have earned $10 million in grossbilling revenues by the end of the 4th year of operation?(d) For your answer in (c), how many users per square km are needed on the first day of servicein order to reach the $10 million mark after the 4th year?

Answered: Image /qna-images/answer/80414ed4-6922-4d0a-890e-ec1423326957.jpg

Pretend your company won a license to build a U.S. cellular system (the application cost for the license was only $500!). Your license is to cover 140 square km. Assume a base station costs $500,000 and a MTSO costs $1,500,000. An extra $500,000 is needed to advertise and start the business. You have convinced the bank to loan you S6 million, with the idea that in four years you will have earned $10 million in gross billing revenues, and will have paid off the loan.

Pretend your company won a license to build a U.S. cellular system (the application cost for the license was only $500!). Your license is to cover 140 square km. Assume a base station costs $500,000 and a MTSO costs $1,500,000. An extra $500,000 is needed to advertise and start the business. You have convinced the bank to loan you S6 million, with the idea that in four years you will have earned $10 million in gross billing revenues, and will have paid off the loan.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter25: Monopoly

Section: Chapter Questions

Problem 13E

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