Asked by Olivia Anne Samonte on Jun 24, 2024
Verified
(Figure: PPV) Use Figure: PPV.The figure shows the demand and marginal revenue for a pay-per-view football game on cable TV.Assume that the marginal cost and average cost are a constant $40.If the cable company is a single-price monopoly and maximizes profit,deadweight loss will be:
A) $0.
B) $45.
C) $60.
D) $90.
Single-Price Monopoly
A market situation where a monopoly exists and sells its product or service at a single price to all consumers without price discrimination.
Deadweight Loss
An economic inefficiency that emerges when an optimal market condition for a product or service isn't reached or is unreachable.
Pay-per-view
A type of television or online streaming service where viewers pay a fee to watch a specific event or program, typically special sports events or movies.
- Analyze the effects of price discrimination on consumer surplus and deadweight loss.
Verified Answer
The deadweight loss is the triangle between the demand curve and the marginal cost curve, from Q = 150 to Q = 180. That area is (1/2) x (70-40) x (180-150) = $600. Therefore, the deadweight loss is $600, or choice C.
Learning Objectives
- Analyze the effects of price discrimination on consumer surplus and deadweight loss.
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