Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.
-Refer to Table 17-7. Assume that there are two profit-maximizing internet radio providers operating in this market. Further assume that they are not able to collude on the price and quantity of subscriptions to sell. How much profit will each firm earn when this market reaches a Nash equilibrium?
A)$12,000
B)$16,000
C)$52,000
D)$64,000

Question

Table 17-7
The information in the table below shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16. 
-Refer to Table 17-7. Assume that there are two profit-maximizing internet radio providers operating in this market. Further assume that they are not able to collude on the price and quantity of subscriptions to sell. How much profit will each firm earn when this market reaches a Nash equilibrium?
A)$12,000 
B)$16,000 
C)$52,000 
D)$64,000

Quizplus · Accepted Answer

In a Nash equilibrium, each firm chooses the best strategy given the strategy chosen by the other firm. Without collusion, they will compete, leading to lower prices and profits. The profit of $12,000 is likely the result of this competitive equilibrium.

Table 17-7 The Information in the Table Below Shows the Total Demand