Suppose That Verizon Wireless Has Hired You as a Consultant

question 42

Multiple Choice

Suppose that Verizon Wireless has hired you as a consultant to determine what price it should set for calling services.Suppose that an individual's inverse demand for wireless services in the greater Boston area is estimated to be P = 100 − 33Q and the marginal cost of providing wireless services to the area is $1 per minute.What is the optimal two-part price that you would suggest to Verizon?

• A) Charge a fixed fee = $95.5 and a usage fee of $1 per minute.
• B) Charge a fixed fee = $3 and a usage fee of $0.33 per minute.
• C) Charge a fixed fee = $148.50 and a usage fee of $1 per minute.
• D) Charge a fixed fee = $3 and a usage fee of $3 per minute.

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Definitions:

Excess Demand

Excess demand occurs when the quantity demanded of a good or service at the current price exceeds the quantity supplied, often leading to upward pressure on prices.

Unregulated Market

A market where government agencies do not control or limit the behaviors of buyers and sellers, allowing the forces of supply and demand to freely set prices.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, leading to a stable market condition.

Equilibrium Quantity

The amount of products or services offered and sought after at the balance price.