Suppose that the Bubble city is considering a proposal to award an exclusive contract to Clarity Vision,

Inc., a cable television provider. If the demand function for the cable services, and the total cost functions

are given below:

P = 28 - 0.0008Q

TC = 120,000 + 0.0006Q^2

where Q = the number of cable subscribers and P = the price of basic monthly cable service.

a. What are the profit maximizing price and quantity if Clarity Vision is the single cable provider in the

city? Calculate the total profit or loss.

b. If the city changes mind and wishes to allow a large number of cable providers in the city, what rule

would you follow to determine the profit maximizing quantity? How would the rule change if the market

is monopoly as in part a)?

c) Give a reason and explain why the cable service company better be a monopoly.

d) Explain why Monopoly power of the cable provider is not relished by the average consumer.

So if the city makes the cable service industry to be competitive, what policy / regulations should the city

follow so that the Clarity Vision produces as a monopoly but serves the city as a perfectly competitive

industry so as to please the consumers?