1. Business
2. Economics
3. suppose the demand functions facing a wireless telephone monopolist are...

# Question: suppose the demand functions facing a wireless telephone monopolist are...

###### Question details

Suppose the demand functions facing a wireless telephone monopolist are QdL=90−200P for each low-demand consumer and QdH=120−200P for each high-demand consumer, where P is the per-minute price in dollars. The marginal cost is $0.15 per minute. Suppose the monopolist offers a menu of two-part tariff plans, with one plan intended for each type of consumer. Suppose too that for any per-minute price PL in the low-demand plan, the fixed fee in the low-demand plan leaves a low-demand consumer with zero surplus; that the number of minutes in the low-demand plan is capped at the number of minutes desired by a low-demand consumer at that plan's per-minute price; and that the high-demand plan has a per-minute price of$0.15 per minute and a fixed fee that leaves the high-demand consumer approximately indifferent between the low- and high-demand plans. Suppose that there are 100 high-demand consumers and 300 low-demand consumers. Will the monopolist's profit be higher when the per-minute price in the low-demand plan is $0.20 or$0.25? Instructions: Round your answers to 2 decimal places as needed.

a. Suppose the monopolist's per-minute price in the low-demand plan is $0.20. Profit =$ .

b. Now suppose the monopolist's per-minute price in the low-demand plan is $0.25. Profit =$ .

###### Solution by an expert tutor 