Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.25 per minute.What are the profits from sales to each of the high-demand consumers?
A) $9.38
B) $28.13
C) $153.13
D) $1.00

Question

Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service is  and 300 low-demand consumers,each of whose monthly demand curve for minutes of wireless is  ,where P is the per-minute price in dollars.Its marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.25 per minute.What are the profits from sales to each of the high-demand consumers?
A) $9.38 
B) $28.13 
C) $153.13 
D) $1.00

Quizplus · Accepted Answer

For high-demand consumers, demand curve is Q=100-P/0.8
Substituting P=$0.25
Q=100-$0.25/0.8=93.75
Total revenue from 1 high-demand consumer per month=93.75*0.25=$23.44
Total revenue from all 100 high-demand consumers=100*$23.44=$2343.75
Total cost for each minute for all consumers=400*30*24*$0.25=$72000
Profits=Total Revenue-Total Cost=$2343.75-$72000=-$69656.25
Thus, profit from sales to each high-demand customer=$\frac{-69656.25}{100}=-$696.56
However, profits are negative implying losses for Always There Wireless.

Suppose Always There Wireless Serves 100 High-High Demand Wireless Consumers,each