Belt Auction

Calculate the short run equilibrium and the long price output?

ABCT, Inc., has been granted a limited-term exclusive license to operate a cable television system in Jackson, Wyoming. Recent operating experience in similar locations suggests a close relation between the monthly price for basic service and the number of subscribers. A.Complete the following table based on ABCT’s projected price, output, and monthly total cost data: Price($000)= 50, 40, 30, 25, 20, 15 Output= 0, 1, 2, 3, 4, 5, TR= unknown MR($000)= unknown TC($000) = unknown MC= 0, 20, 40, 60, 80, 100 B.Calculate the short-run equilibrium monopoly price/output combination and profit level. C.Calculate the long-run price/output combination and profit level if competitive bidding for the franchise resulted in a perfectly competitive market outcome.

Public Comments

1. A: P...Q....TR.....MR.....MC..... TC....Profit 50..0.....0.......0.........0......... 0.........0 40..1....40.....40......20......... 20....+20 30..2....60.....20......40......... 60.......0 25..3....75.....15......60........ 120....-45 20..4....80.......5......80........ 200...-120 15..5....75......-5.....100....... 300...-225 B: Equilibrium: MC=MR P=40 Q=1 Profit=TR-TC=40-20=+20 C: Profit=0 TR=TC 60=60 Q=2 P=30 Added: Though it seems like $000 means thousands so: A: P($000).Q.TR..MR($000).MC.. TC($000) 50.........0..00'000.....00......0...... 0.00 40.........1..40'000.....40.....20..... 0.02 30.........2..60'000.....20.....40..... 0.06 25.........3..75'000.....15.....60..... 0.12 20.........4..80'000......5......80..... 0.20 15.........5..75'000.....-5.....100.... 0.30 B: Equilibrium: MC=MR P=20'000 Q=4 Profit=TR-TC=80'000-200=+79'800 C: Profit=0 TR=TC there no combination of TC=TR in schedule so output will be greater than Q=5'000 and price will be less than P=15.000