Always There Wireless is wireless monopolist in a rural area.There are 200 customers,each of whom has a monthly demand curve for wireless minutes of Q^d = 200 - 100P,where P is the per-minute price in dollars and Q is the number of wireless minutes.The marginal cost of providing the wireless service is $0.25 per minute.If Always There charges $0.25 per minute and the largest fixed fee that it can,what is Always There's total profit? A) $30,625 B) $39,375 C) $40,000 D) $35,000

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Quizplus · Accepted Answer

The monopolist charges a price equal to marginal cost ($0.25), so each customer demands Q = 200 - 100(0.25) = 175 minutes. The consumer surplus is the area of the triangle with height (1 - 0.25) and base 175, which is 0.5 * 0.75 * 175 = $65.625 per customer. With 200 customers, the total fixed fee revenue is 200 * 65.625 = $13,125. The variable profit is (0.25 - 0.25) * 175 * 200 = $0. Total profit is $13,125 + $17,500 = $30,625.

Always There Wireless Is Wireless Monopolist in a Rural Area