Use the Following to Answer Question

question 172

Multiple Choice

Use the following to answer question:
Figure: Pricing Strategy in Cable TV Market I
-(Figure: Pricing Strategy in Cable TV Market I) Use Figure: Pricing Strategy in Cable TV Market I.If both CableNorth and CableSouth advertise,then without any collusion:

• A)CableNorth will stop advertising to maximize profits.
• B)CableSouth will stop advertising to maximize profits.
• C)there will be no incentive for either CableNorth or CableSouth to stop advertising.
• D)there is an incentive for both CableNorth and CableSouth to stop advertising.

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Definitions:

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing the additional gain beyond the normal profit level.

Implicit Costs

The opportunity costs of using resources owned by the firm for its own production rather than earning income elsewhere.

Accounting Profits

The net income reported on the financial statements of a company, calculated as total revenues minus explicit costs and depreciation.

Industry Supply

The total quantity of a specific good or service that all firms in an industry are willing to sell at a given price level.