Media Cable, a typical utility based monopoly, provides cable service in a rural community. Table 1 shows the demand that Media Cable experiences at each price and Graph 1 depicts Media Cable's demand curve. Why does such a monopoly face a downward sloping demand curve?

Table 1

PriceAmount Demanded

$160 0

$130 100

$100 200

$80 400

$40 600

$0 850

Question 3 options:

a)

More people are going to want to pay the minimum price offered. If they are offering free cable then many people will want to take advantage of that.

b)

More people are willing to pay for cable as the price of cable service decreases.

c)

Because the price Media Cable expects to receive for its output will not remain constant as output increases.

d)

Because fewer people are willing to pay a higher price. More people are willing to pay a lower price but Media Cable is less willing to provide the service at the lower price.

e)

Because Media Cable is the only producer of cable in this market, so its demand curve is the market demand curve for the entire industry.