4.You are the sales manager of TELEWORLD, a satellite company, that broadcasts TV to subscribers in Valencia and Zaragoza. The demand functions for each of these two groups areQV= 60 - 0.25pVandQZ= 100 - 0.50pZwhere Q is in thousands of subscriptions per year and P is the subscription price per year. The cost of providing Q units of service is given byC(Q) = 1,000 + 40Q, whereQ = QV+ QZ.

a) What are the profit-maximizing prices and quantities for the Valencia and Zaragoza markets? b) As a consequence of a new satellite HISPASAT recently installed, people in Zaragoza receive TELEWORLD's Valencia broadcasts, and people in Valencia receive TELEWORLD's Zaragoza broadcasts. As a result, anyone in Valencia or Zaragoza can receive TELEWORLD's broadcasts by subscribing in either city. Thus, TELEWORLD can charge only a single price. What price should he charge, and what quantities will he sell in Valencia and Zaragoza?

c) In which of the above situations, (a) or (b), is TELEWORLD better off? Can you think of a better pricing strategy? In terms of consumer surplus, which situation do people in Valencia prefer and which do people in Zaragoza prefer? Why?