Suppose the demand functions facing a wireless telephone monopolist are Qt =90-200P for each low-demand consumer and QH = 160-200P for each high-demand consumer, where Pis the per-minute price in dollars. The marginal cost is $0.02 per minute. Suppose the monopolist offers a menu of two-part tariff plans, with one plan intended for each type of consumer. Suppose too that for any per- minute price PL in the low-demand plan, the fixed fee in the low-demand plan leaves a low-demand consumer with zero surplus; that the number of minutes in the low-demand plan is capped at the number of minutes desired by a low-demand consumer at that plan's per-minute price; and that the high-demand plan has a per-minute price of $0.02 per minute and a fixed fee that leaves the high- demand consumer approximately indifferent between the low- and high-demand plans. Suppose that there are 100 high-demand consumers and 400 low-demand consumers. Will the monopolist's profit be higher when the per-minute price in the low-demand plan is $0.07 or $0.12? Instructions: Round your answers to 2 decimal places as needed. a. Suppose the monopolist's per-minute price in the low-demand plan is $0.07. Profit= $ b. Now suppose the monopolist's per-minute price in the low-demand plan is $0.12. Profit= $
Suppose the demand functions facing a wireless telephone monopolist are Qt =90-200P for each low-demand consumer and QH = 160-200P for each high-demand consumer, where Pis the per-minute price in dollars. The marginal cost is $0.02 per minute. Suppose the monopolist offers a menu of two-part tariff plans, with one plan intended for each type of consumer. Suppose too that for any per- minute price PL in the low-demand plan, the fixed fee in the low-demand plan leaves a low-demand consumer with zero surplus; that the number of minutes in the low-demand plan is capped at the number of minutes desired by a low-demand consumer at that plan's per-minute price; and that the high-demand plan has a per-minute price of $0.02 per minute and a fixed fee that leaves the high- demand consumer approximately indifferent between the low- and high-demand plans. Suppose that there are 100 high-demand consumers and 400 low-demand consumers. Will the monopolist's profit be higher when the per-minute price in the low-demand plan is $0.07 or $0.12? Instructions: Round your answers to 2 decimal places as needed. a. Suppose the monopolist's per-minute price in the low-demand plan is $0.07. Profit= $ b. Now suppose the monopolist's per-minute price in the low-demand plan is $0.12. Profit= $
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.9P
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Transcribed Image Text:Suppose the demand functions facing a wireless telephone monopolist are
Q = 90-200P
for each low-demand consumer and
Q= = 160-200P
for each high-demand consumer, where P is the per-minute price in dollars. The marginal cost is $0.02 per minute. Suppose the
monopolist offers a menu of two-part tariff plans, with one plan intended for each type of consumer. Suppose too that for any per-
minute price PL in the low-demand plan, the fixed fee in the low-demand plan leaves a low-demand consumer with zero surplus; that
the number of minutes in the low-demand plan is capped at the number of minutes desired by a low-demand consumer at that plan's
per-minute price; and that the high-demand plan has a per-minute price of $0.02 per minute and a fixed fee that leaves the high-
demand consumer approximately indifferent between the low- and high-demand plans. Suppose that there are 100 high-demand
consumers and 400 low-demand consumers. Will the monopolist's profit be higher when the per-minute price in the low-demand plan
is $0.07 or $0.12?
Instructions: Round your answers to 2 decimal places as needed.
a. Suppose the monopolist's per-minute price in the low-demand plan is $0.07.
Profit = $
b. Now suppose the monopolist's per-minute price in the low-demand plan is $0.12.
Profit = $
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