Question

Suppose that Verizon Wireless has hired you as a consultant to determine what price it should set for calling services. Suppose that an individual's inverse demand for wireless services in the greater Boston area is estimated to be P = 100 − 33Q and the marginal cost of providing wireless services to the area is $1 per minute. What is the optimal two-part price that you would suggest to Verizon?

Answer 1

Answer:

$0

Explanation:

From the question above, we are given that the value for marginal cost = 1 and the value of P, P = 100 - 33Q.

We should note that the value of P = the value of the marginal cost. That is to say, we are going to have something like;

100 - 33Q = 1. Therefore, 1 - 100 = -33Q.

so, - 99 = - 33Q.

Hence, the value of Q = 3.

Therefore, let us Calculate the value for the consumer surplus which we can get by looking at the area

above the Price line and below demand curve. Therefore, the value of P = 1.

Hence, P = MC.

Then, the value of Q = 0.

Lump Sum fee or fixed sum = (1/2) × base × height = (1/2) × (100 - 1) × 3.

=$ 148.5.

Hence, the consumer surplus is $0 because the consumer surplus is compute as fixed fee.