Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

Firm Z gives Internet access and a bundle of related information services to subscribers. Best estimate of subscriber demand is given by P = 20 - 5Q where Q is number of subscribers per month in millions and P is the monthly subscription price. In turn, firm Z purchases server capacity from firm N, paying charge of 2 million per month plus $10 per month for each subscriber. All other operating expenses for firm Z (for employees, office, equipment, and so on) come to a total of 2 million per month.

a)(i) To maximize its profit, how many subscribers must firm Z serve and at what monthly subscription price?

(ii) Firm Z has contracted with firm N for next six months. Unfortunately, Z discovers that its operating expenses are closer to 4 million (rather than 2 million). Should firm Z continue to operate over next six months? Beyond six months.

b) Firm Z has identified segment of "hardcore, sophisticated users" provider who tends to "shop around" in choosing their preferred internet provider. These users also spend more time online, about 25% more time than average regular subscriber. (in terms of capacity used, each hardcore user counts as 1.25 regular subscribers). Should the firm offer a different subscription price to these users?Provide a brief qualitative explanation.

c) Firm N offers to give firm Z monthly server capacity for up to 4 million subscribers at flat rate of 15 million. Under this option, answer problems in Part A, section i.(suppose the firms other operating expenses come to 2 million). From firm Z's perspective, are these new contract terms more or less attractive than original terms in part A.

d) Assume that firm Z elects new contract offered in part c. Now firm recognizes that it can gain the additional source of revenue by allowing banner advertising on it site. It has recently signed advertising agreements with various internet vendors. Effect of these agreements is to bring firm $10 of advertising revenue for each subscriber to the site. What affect (if any) would this have on firm Z's profit maximizing subscription price and number of subscribers?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M922702

Have any Question? 


Related Questions in Microeconomics

Assignmentinstructions the topic of the research paper will

Assignment Instructions: The topic of the research paper will be any disease or condition of the body. The paper must include a thorough description of the disease/condition; current statistics of those affected - epidem ...

Q1 in quantity theory of money model mv py assume that v

Q1. In quantity theory of money model, MV = PY, assume that V is constant, M is growing at 6% per year, Y is growing at 3%. a. If r = 2, what is i? b. If the Fed reduces the money growth rate by 2% points per year, what ...

Fiscal policy modulewhich has a larger effect on aggregate

Fiscal Policy Module Which has a larger effect on aggregate demand: an increase in government expenditure or an equal-sized decrease in taxes? Explain your answer. To eliminate a recessionary gap, which fiscal policy sho ...

Problem setthis problem set is due on monday october 24th

Problem Set This problem set is due on Monday, October 24th in class. Consider the specific factors model (2 goods, 3 factors, where labor is the flexible factor) for a given small country with the following Cobb-Douglas ...

Assignmentlearning objectives covered1explain 3 ways the

Assignment Learning Objectives Covered: 1. Explain 3 ways the statement of goals, application of rewards, and institution of discipline affect and motivate ethical behavior in individuals 2. Demonstrate how roles and aut ...

Assignment production cost analysis and estimation applied

Assignment: Production Cost Analysis and Estimation Applied Problems Please complete the following two applied problems: Problem 1: William is the owner of a small pizza shop and is thinking of increasing products and lo ...

Assignmentyou are the director of safety and health at

Assignment You are the Director of Safety and Health at Rotorcraft America, a mid-sized company that designs, manufactures and sells helicopters. Your organization has manufacturing operations in San Francisco, Californi ...

Assignment economics read the following case study and

ASSIGNMENT: ECONOMICS Read the following case study and answer the given question. THE MACROECONOMICS OF POVERTY REDUCTION: THE CASE STUDY OF BANGLADESH Adapted: Osmani, S.R; Mahmud, W; Sen, B; Dagdeviren, H; and Seth, A ...

1 this question is for discussion in teamsas the semester

1. This question is for discussion in teams. As the semester progresses. we will discuss these issues in class. Visit The World Factbook at https://www.cia.govlibrarypublications:The-world-factbook'. In "Please select a ...

The economy is full employment now the government wants to

The economy is full employment. Now the government wants to change the composition of demand toward investment and away from consumption without, however, allowing aggregate demand to beyond full employment. What is requ ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro