Use the following scenario to answer the following questions:
In 2011,three firms (Firm A,Firm B,and Firm C)were selling cellular phone service for a price of $40 per month in Playa del Carmen,Mexico.Each firm serviced 100 cell phone customers; thus,all firms together serviced a total of 300 customers.Assume marginal cost is $0 (zero)for all firms and thus total revenue is equal to total profit.In 2012,Firms A and B each continued to service 100 customers,but Firm C now serviced 150 customers; thus,all firms together serviced a total of 350 customers.All firms now charge $30 per month.
-Firm C's monthly profit increased by ________ due only to the output effect and decreased by ________ due only to the price effect,for a net increase of $500.
A) $2,500; $2,000
B) $3,000; $2,500
C) $500; $0
D) $1,500; $1,000
E) $3,500; $3,000

Question

Quizplus · Accepted Answer

The Answer of Use the following scenario to answer the following questions:
In 2011,three firms (Firm A,Firm B,and Firm C)were selling cellular phone service for a price of $40 per month in Playa del Carmen,Mexico.Each firm serviced 100 cell phone customers; thus,all firms together serviced a total of 300 customers.Assume marginal cost is $0 (zero)for all firms and thus total revenue is equal to total profit.In 2012,Firms A and B each continued to service 100 customers,but Firm C now serviced 150 customers; thus,all firms together serviced a total of 350 customers.All firms now charge $30 per month.
-Firm C's monthly profit increased by ________ due only to the output effect and decreased by ________ due only to the price effect,for a net increase of $500.
A) $2,500; $2,000
B) $3,000; $2,500
C) $500; $0
D) $1,500; $1,000
E) $3,500; $3,000

Use the Following Scenario to Answer the Following Questions