Question

The demand for internet services in the town of Knoxville is given by Q = 10,000 − 50P, where Q is the number of households serviced and P is the price of the service per month. The marginal cost of providing internet services per household is $10.

a. If Verizon is the only provider of internet services in the town, what price can it set and how many households would be served?

b. Now suppose a new firm INSAT enters the market. What happens to the price and output? How is the profit of Verizon affected?

Answer 1

Answer)

A) price = $99.9

Quantity = 5005

Profit = $44949.5

B) price = $10

Quantity = 9500

Profit = 0.

Please see clearly through the photo(I know its bit dark, but the writing is clear)

If you still have any doubts please comment...

Q = 10000 - 50P MC - $10 TR - P-Q = toooop - Sope a. If Veuron is the only food lie. If Verizon is a only for provider of Internet provider Monopolist Services Earth condition is MR = MC MR = MC 10000 - lool. = 10 loop = 9990 Pe 99.9. $ = 10000 - 50 10000 - 50C99.9) 505 → Households Served Irofit = TR-TC P-Q - Mc = 99.9 5005) - - 499999.5-50050 = $44949.5 A new firm enters markets. So, now Verizon will not be in - Monopoly. Now, there will be Perfect competition tam condition is P = MC P = MC 200-Q zlo louse - Q - 500 g = 9500 P = 200- so = 200 – 950050 = $ 10 TR - Tc. lox 9500 - 10x9500 Now, Verizon earns zero profits since it is not having monopoly