Table 17-4

question 287

Multiple Choice

Table 17-4. The information in the table below shows the total demand for high-speed Internet subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $200,000 (per year) and that the marginal cost of providing an additional subscription is always $80.

-Refer to Table 17-4.Assume there are two high-speed Internet service providers that operate in this market.If they are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions,then their agreement will stipulate that

• A) each firm will charge a price of $120 and each firm will sell 5,000 subscriptions.
• B) each firm will charge a price of $160 and each firm will sell 4,000 subscriptions.
• C) each firm will charge a price of $100 and each firm will sell 3,000 subscriptions.
• D) each firm will charge a price of $200 and each firm will sell 3,000 subscriptions.

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Definitions:

Substitution Effect

A response to price changes in which consumers replace more expensive items with less costly alternatives.

Income Effect

The change in an individual's consumption patterns resulting from a change in their real income.

Labor Supply Curve

A graphical representation showing the relationship between the wage rate and the quantity of labor that workers are willing to supply.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to replace more expensive items with cheaper alternatives.