Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A friend of yours is considering two movie streaming services. Provider A charges $100 per year for the service regardless of the number of movies

A friend of yours is considering two movie streaming services. Provider A charges $100 per year for the service regardless of the number of movies streamed. Provider B does not have a fixed service fee but instead charges $1 per movie. Your friend's annual demand for movies is given by the equation QD=12030P , where P is the price per movie. With Provider A, the cost of an extra movie is $0 . With Provider B, the cost of an extra movie is $1 . Given your friend's demand for movies and the cost of an extra movie with each provider, if your friend used Provider A, he would watch 120 movies, and if he used Provider B, he would watch 90 movies. This means your friend would pay $100 for service with Provider A and $90 for service with Provider B. Use the following graph to draw your friend's demand curve for movies. Then use the green triangle to help you answer the questions that follow Your friend would obtain $ in consumer surplus with Provider A and $ in consumer surplus with Provider B. Given this information, which provider would you recommend that your friend choose? Provider A

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Thermodynamics An Engineering Approach

Authors: Yunus A. Cengel, Michael A. Boles

8th edition

73398179, 978-0073398174

Students also viewed these Economics questions