Problem
Suppose a monopoly provides both Cable TV and broadband access in a city. The fixed costs are $1 million per day. The number of households (measured in millions) demanding cable is Di(p)2-P (where pi is measured in S/day). The demand for broadband access is D2(p2) 1p2
a. Derive inverse demand curves and aggregate consumer surplus as a function of prices.
b. Find the Ramsey-Boiteaux prices and associated consumer surplus.
c. Find the prices if the company is allowed to recover costs, allocating fixed costs equally. Compare (b) and (c)
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.