Sal’s Streaming Company streams TV shows to subscribers in the US and Canada. Demand is ??? = 50 − (1⁄3)??? and ??? = 80 − (2/3)??? where ?’s are in thousands of subscriptions per year and ?’s are the subscription prices per year. The cost of providing ? units of service is given by ?? = 1000 + 30?, where ? = ??? + ???. (a) What are the profit-maximizing prices and quantities for the US and Canadian markets? (b) As a consequence of a new VPN service that Facebook has developed, subscribers in Canada are now able to get the US streams and vice versa, so Sal can charge only a single price. What is the profit-maximizing single price that he should charge? (c) In which situation is Sal better off? In terms of consumers’ surplus which situation do people in Canada prefer and which do people in the US prefer? Why?

Sal’s Streaming Company streams TV shows to subscribers in the US and Canada. Demand is ??? = 50 − (1⁄3)??? and ??? = 80 − (2/3)??? where ?’s are in thousands of subscriptions per year and ?’s are the subscription prices per year. The cost of providing ? units of service is given by ?? = 1000 + 30?, where ? = ??? + ???. (a) What are the profit-maximizing prices and quantities for the US and Canadian markets? (b) As a consequence of a new VPN service that Facebook has developed, subscribers in Canada are now able to get the US streams and vice versa, so Sal can charge only a single price. What is the profit-maximizing single price that he should charge? (c) In which situation is Sal better off? In terms of consumers’ surplus which situation do people in Canada prefer and which do people in the US prefer? Why?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter12: More Realistic And Complex Pricing

Section: Chapter Questions

Problem 12.1IP

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