Question

The following table shows a small community’s demand for monthly subscriptions to a streaming movie service. Assume that only two firms (Nextflix and Flixbuster) sell in this market, that each firm offers the same quality of service and movie selection, and that each firm’s marginal cost is constant and equal to 0 (zero) due to excess capacity. Use this information to answer the following questions:

Price/Month (P)	Number of Customers (Q)	Total Revenue/Month (TR)
$10	0	$0
9	100	900
8	200	1,600
7	300	2,100
6	400	2,400
5	500	2,500
4	600	2,400
3	700	2,100
2	800	1,600
1	900	900
0	1,000	0

If this market were a monopoly instead of a duopoly, the market price would be ________ and the quantity of streaming movie subscriptions purchased each month would be ________.

a.		$0; 1,000
b.		$3; 700
c.		$5; 500
d.		$7; 300
e.		$9; 100

Answer 1

Market price will be $5 and quantity will be 500.

Note that cost = 0 ,it means profit = TR- TC = TR- 0 = TR

So, here firm will maximize will TR in order to maximize its profit.

TR is maximum when price = 5 and quantity = 500.