If the popular television show The Bachelor is shown on pay-per-view television every Monday at 9pm, then the demand curve for each episode is given below. Given that the marginal cost of showing an episode to an additional household is $0:

Question

If the popular television show The Bachelor is shown on pay-per-view television every Monday at 9pm, then the demand curve for each episode is given below.  Given that the marginal cost of showing an episode to an additional household is $0:

Quizplus · Accepted Answer

Since the marginal cost of showing an additional household is zero and the demand curve is downward sloping, the pay-per-view channel would maximize its profit by charging a price equal to the marginal cost, which is zero. As a result, more households will choose to watch the show than would be socially optimal, since the price is zero, making the show more affordable and accessible to a larger audience. Therefore, the number of households watching each episode would be higher than the socially optimal number, resulting in fewer than the socially optimal benefits being generated. Thus, the best choice is D.

If the Popular Television Show the Bachelor Is Shown on Pay-Per-View