Question

Harvey Rabbitt pays for monthly cable TV service. Last​ week, the cable company informed Harvey that his monthly cable price would go down because the city council has granted approval for three new cable companies to service his area. How is the market for cable TV services affected by​ this?

Answer 1

Answer:

The company pass from monopoly to a competitive market.

The new companies increase the supply and therefore, the equilibrium price decreases.

Explanation:

The approval of new cable companies generates an increase in the supply. As the suply shift to the right the quantity (people wiht a monthly cable service) will increase and the price (monthly fee) decrease.

Harvey's Company is already starting to decrease his price to do an effort to retain his customer. This company is no longer a monopoly so it will decrease price to be more competitive.