Superior Cable TV buys the right to provide an exclusive movie channel (HBOW) in its province.Superior pays
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Question:
Superior Cable TV buys the right to provide an exclusive movie channel (HBOW) in its province. Superior pays $300,000 per year for HBOW and the marginal cost of providing HBOW is zero. Superior's economist realizes they have two groups of customers: the 8,000 hardcore HBOW fans who will pay up to $300 a year for the exclusive network; and the 70,000 casual viewers who will pay up to $30 a year for HBOW.
If Superior Cable TV cannot discriminate prices, what is its profit-maximizing price? What is your profit?
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