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Figure: PPV
-(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company is a single-price monopoly, to maximize profit it will sell _____ subscriptions and charge _____ per subscription.
A) 8; $20
B) 6; $40
C) 3; $70
D) 2; $80

Question

Use the following to answer questions:
Figure: PPV 
-(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company is a single-price monopoly, to maximize profit it will sell _____ subscriptions and charge _____ per subscription.
A) 8; $20 
B) 6; $40 
C) 3; $70 
D) 2; $80

Quizplus · Accepted Answer

A single-price monopoly maximizes profit where marginal revenue equals marginal cost. If the marginal cost is $40, the monopoly will choose the quantity where marginal revenue is also $40. According to the figure, this occurs at 3 subscriptions, where the price is $70.

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