Price of a cell phone minute falls

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Reference no: EM137763

Q1. Dominant price leadership exists when the dominant firm establishes the price at the quantity where it's MR = MC, and permits all other firms to sell all they want to sell at that price. The dominant firm charges the lowest price in the industry. The dominant firm decides how much each of its competitors can sell. One firm drives the others out of the market.

Q2. A consumer has income of $100 and can spend it on cell phone minutes, at $1 per minute, or DVDs at $10 per DVD.

Part 1: Draw this consumer's budget line (BL).

Part 2: Suppose now the price of a cell phone minute falls to $.50 per minute. Show how this will change the budget line.

Reference no: EM137763

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