Sal's satellite company broadcasts TV to subscribers in Los Angeles and New York. The demand functions for each of these two groups are:

Q_NY= 60 - 0.25P_NY

Q_LA= 100 - 0.5P_LA

where 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 by

C = 1000 + 40Q

where Q = Q_NY+ Q_LA.

a. What are the profit-maximizing prices and quantities for the New York and Los Angeles markets? (round all answers to two decimal places)

In New York, the equilibrium quantity is[25]subscribers at an equilibrium price of $[140].

While in Los Angeles, the equilibrium quantity is[40]subscribers at an equilibrium price of $[120].

b.As a consequence of a new satellite that the Pentagon recently deployed, people in Los Angeles receive Sal's New York broadcasts and people in New York receive Sal's Los Angeles broadcasts. As a result, anyone in New York or Los Angeles can receive Sal's broadcasts by subscribing in either city. Thus Sal can charge only a single price. What price should he charge, and what quantities will he sell in New York and Los Angeles?

The equilibrium price would be $[.............], and Sal would have [.............] subscribers in New York and [..................] subscribers in Los Angeles.

c. In which of the above situations, a or b, is Sal better off? In terms of consumer surplus, which situation do people in New York prefer and which do people in Los Angeles prefer? Why?