Suppose the Demand Function for Cable TV Service Is Given

question 32

Multiple Choice

Suppose the demand function for cable TV service is given by Q_CTV = 15 - 0.25 × P_CTV + 0.0005 × M + 0.3 × P_STV,where Q_CTV is the quantity of cable TV demanded (thousands of households) ,P_CTV is the price of cable TV,M is income and P_STV is the price of satellite TV service.We can see that:

• A) cable TV and satellite TV are substitutes.
• B) cable TV and satellite TV are complements.
• C) satellite TV is a normal good.
• D) satellite TV is an inferior good.

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Definitions:

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for some degree of market power.

Pure Competition

This is a market structure characterized by a large number of small firms, homogeneous products, and easy market entry and exit, leading to price-taking behavior.

Average Total Cost

The total cost of production divided by the number of units produced, including both fixed and variable costs.

Long-Run Equilibrium

A state in which all factors of production and outputs in an economy are fully adjusted so that economic inputs meet outputs in a sustainable way, leading to no excess demand or supply.