Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 minusone half q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. If the firm will charge a monthly access fee plus a per hour rate, the monthly access fee will equal

Question

Business

Damaris

22 July, 03:59

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 minusone half q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. If the firm will charge a monthly access fee plus a per hour rate, the monthly access fee will equal

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Answers (1)

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Santos Gray · Answer 1

8 Hours

Explanation:

Solution

The demand or Internet access from a certain leading provider can be represented as follows:

Demand

P = 5 - 1/2q

The Marginal Cost = $1

Now

Under the discrimination price with two part tariff the producer will like to have a complete consumer surplus. He will produce till price = MC

Thus,

5 - 1/2q = 1

4*2 = q

8 hours = q