What is the gain in surplus from regulating the cablenets

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Reference no: EM13223204

A medium sized city is considering offering exclusive rights to CableNet, a cable television carrier.

The demand function for cable in this city is: P= 28- 0.0008Q;

The resulting marginal revenue function is: MR = 28 - .0016Q ;

Cablenet's marginal cost function is MC= 0.0012Q

(Where Q = the number of clbe subscribers and P = the price of basic monthly service.

1. If Cablenet has exclusive rights, how much will they charge per month: How many people will subscribe at this price?

2. If the mayor of this city wants to maximize surplus what price per month should she mandate that CableNet charge? How many people will subscribe at this price?

3. What is the gain in surplus from regulating the CableNet's price?

4. How much is the monopoly worth to CableNet (i.e. how much will they spend lobbying the government not to regulate their price)?

Reference no: EM13223204

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