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ClassOf1 Upstart Phone Monthly

ClassOf1 Upstart Phone Monthly

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Calculate the charges by assuming same monthly rental fee and unit price to all its customers.
Calculate the charges by assuming same monthly rental fee and unit price to all its customers.

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Published by: ClassOf1.com on Sep 11, 2009
Copyright:Attribution Non-commercial

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11/27/2012

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Sub: Economics Topic: Micro Economics
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The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same inlieu of your academic submissions for grades.
ClassOf1  provides exert guidance for College, Graduate and High school  homework  and live online tutoring on subjects like Finance, Marketing , Statistics , Economics and others. Check out more solved problems in our  Solution Library .
 
Question: 
Calculate the charges by assuming same monthly rental fee and unit price to allits customers.
An upstart phone company has only two potential large customers, Firm A and Firm B.
Firm A’s
monthly deman
d for phone calls is Q1 = 2,800 − 200p (with p measured in
 
cents) and Firm 2’s isQ2 =5,000 − 100p. The marginal cost of providing a phone call is 6
cents. Assuming the phonecompany has to charge the same monthly rental fee and unit price to all its customers, at whatlevel should it set these charges?
Solution: 
This is a case of two part tariff.Price of call is set equal to its MC=6cents.Here the monthly rental charged will be the minimum of the consumer surplus (CS) of bothtypes of consumers.When P=6 then Q1=1600 and Q2=4400

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