Table 17-3

question 89

Multiple Choice

Table 17-3. The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.

-Refer to Table 17-3.Assume there are two digital cable TV companies operating 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 $90 and each firm will sell 4,500 subscriptions.
• B) each firm will charge a price of $90 and each firm will sell 9,000 subscriptions.
• C) each firm will charge a price of $120 and each firm will sell 3,000 subscriptions.
• D) each firm will charge a price of $150 and each firm will sell 1,500 subscriptions.

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Definitions:

Production Function

A mathematical model that describes the relationship between input factors and the output of goods or services.

Costs

The expenses involved in producing or acquiring goods and services, including labor, materials, and overheads.

Average Total Cost

The total cost of production divided by the number of units produced, giving a per unit cost of production.

Output

The total amount of goods or services produced by a person, machine, or company.