Suppose Always There Wireless serves 100 high-demand wireless consumers,who each have a monthly demand curve for wireless minutes of Q^d_H = 200 - 100P,and 300 low-demand consumers,who each have a monthly demand curve for wireless minutes of Q^d_L = 100 - 100P,where P is the per-minute price in dollars.The marginal cost is $0.25 per minute.Suppose Always There Wireless charges $0.30 per minute.If Always There Wireless charges the highest fixed fee that it can without losing the low-demand consumers,what is Always There Wireless's total profit? A) $11,200 B) $13,200 C) $11,700 D) $12,700

Question

Quizplus · Accepted Answer

The highest fixed fee is the consumer surplus of the low-demand consumers. At $0.30 per minute, Q^d_L = 70. Consumer surplus for low-demand consumers is (0.5 * 70 * (1 - 0.30)) = $24.5 per consumer. Total profit is (100 * 70 * 0.05 + 300 * 70 * 0.05) + (300 * 24.5) = $11,700.

Suppose Always There Wireless Serves 100 High-Demand Wireless Consumers,who Each