Describe why monopolist like media cable faces

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Reference no: EM13396249

Suppose that Media Cable is a single-price monopolist in the market for cable in Anywhere, Iowa. Media has five potential customers: Morgan, Larry, Clyda, Janet, and Tom.

Each of these customers are willing to purchase cable service, but only if the price is just equal to, or lower than, his or her willingness to pay. Morgan's willingness to pay is $130; Larry's, $100; Clyda's, $80; Janet's, $40; and Tom's, $0.

Media Cable's marginal cost per cable package is $40. The demand schedule for cable service packages is shown in the accompanying table.

Price of Cable Service	Quantity of Cable Service Demanded
160	0
130	1
100	2
80	3
40	4
0	5

Calculate Media Cable's total revenue and its marginal revenue

Price of Cable Service	Qty of Cable Service demanded	Total Revenue	Marginal Revenue
$160	0		-
130	1
100	2
80	3
40	4
0	5

b. Explain why a monopolist, such as Media Cable, faces a downward-sloping demand curve

c. Explain why the marginal revenue from an additional sale is less than the price of the service

d. Suppose Media Cable currently charges $80 for its service. If it lowered the price to $40, how large is the price effect?

e. How large is the quantity effect?

f. What is the profit maximizing quantity and price for Media Cable?

Reference no: EM13396249

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