Answer the following questions based on the following inform

Answer the following questions based on the following information. Suppose that Media Cable is a single-price monopolist in the market for cable in Anywhere, Iowa. Media has five potential customers: Morgan, Larry, Clyda, Janet, and Tom.

Each of these customers are willing to purchase cable service, but only if the price is just equal to, or lower than, his or her willingness to pay. Morgan’s willingness to pay is $130; Larry’s, $100; Clyda’s, $80; Janet’s, $40; and Tom’s, $0.

Media Cable’s marginal cost per cable package is $40. The accompanying table shows Media Cable’s demand schedule: Total Revenue and Marginal Revenue at each price level.

Price of

Cable Service

Qty of Cable

Service demanded

Total Revenue

Marginal Revenue

$160

0

0

-

130

1

$130

$130

100

2

$200

$70

80

3

$240

$40

40

4

$160

- $80

0

5

0

- $160

What is the profit maximizing quantity and price for Media Cable?
     1 at $130
       2 at $100
       3 at $80
       4 at $40
       5 at $0

Solution

As we know that profit is maximized where marginal revenue is equal to marginal cost which we can see in quantity 3 :MR=40=MC

Answer=3 at$80