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 $0.50 per minute,how many minutes will each customer buy each month? A) 200 B) 150 C) 175 D) 250

Question

Quizplus · Accepted Answer

We can find the equilibrium quantity for each customer by setting the demand curve equal to the marginal cost:

200 - 100P = 0.25P

Solving for P:

P = $0.40

Then we can plug this price back into the demand curve to find the equilibrium quantity:

Q = 200 - 100(0.40) = 160

However, this is above the price Always There is charging ($0.50), so each customer will only buy up to their individual quantity demanded at that price:

200 - 100(0.50) = 150

Therefore, each customer will buy 150 minutes per month at the given price.

Always There Wireless Is Wireless Monopolist in a Rural Area