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D. Oligopoly (18 points) The information in the table below shows the total demand for high-speed Internet subscriptions in a small urban market. Assume that
D. Oligopoly (18 points) The information in the table below shows the total demand for high-speed Internet subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual xed cost of $200,000 (per year) and that the marginal cost of providing an additional subscription is always $0. Quantity I Price (per year) 0 I $320 2,000 I $280 4,000 I $240 6,000 I $200 8,000 I $160 10,000 I $120 12,000 I s 80 14,000 I s 40 16,000 I s 0 1. Suppose there is only one high-speed Internet service provider in this market and it seeks to maximize its prot. How many subscriptions will the company sell and what price will it charge for each subscription? 2. Assume there are two high-speed Internet service providers that operate in this market. Ifthey are able to collude on the quantity of subscriptions that will be sold and on the price that will be charged for subscriptions, then how many subscriptions will each rm sell and what price will each charge? HOW much prot will each company earn if they agree to divide the market evenly? (Show solution) 3. Assume there are two prot-maximizing high-speed Internet service providers operating in this market. Further assume that they are not able to collude on the price and quantity of subscriptions to sell. How many subscriptions will each rm sell and what price will each charge per subscription when this market reaches the Nash equilibrium? How much will be the total subscriptions in the market? 4. Under the conditions given in Question #3 of this problem, how much prot will each rm earn when this market reaches a Nash equilibrium (show solution)? 5. What is the socially efcient number of intemet subscriptions for this market and at what price will each subscription be sold? Explain briey
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