1. Answer the following questions based on the following information. Suppose that Media Cable is a single-price monopolist in the market for cable in Anywhere, Iowa. Media has five potential customers: Morgan, Larry, Clyda, Janet, and Tom.
Each of these customers are willing to purchase cable service, but only if the price is just equal to, or lower than, his or her willingness to pay. Morgan’s willingness to pay is $130; Larry’s, $100; Clyda’s, $80; Janet’s, $40; and Tom’s, $0.
Media Cable’s marginal cost per cable package is $40. The accompanying table shows Media Cable’s demand schedule: Total Revenue and Marginal Revenue at each price level.
Price of
Cable Service
|
Qty of Cable
Service demanded
|
Total Revenue
|
Marginal Revenue
|
$160
|
0
|
0
|
-
|
130
|
1
|
$130
|
$130
|
100
|
2
|
$200
|
$70
|
80
|
3
|
$240
|
$40
|
40
|
4
|
$160
|
- $80
|
0
|
5
|
0
|
- $160
|
Why does a monopolist face a downward sloping demand curve? (Points : 8) |