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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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11/27/2012

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Sub: Economics Topic: Micro Economics
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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