CableNorth High price Low price CableNorth eams $100,000 CableNorth eams $130,00
ID: 1161713 • Letter: C
Question
CableNorth High price Low price CableNorth eams $100,000 CableNorth eams $130,000 High CableSouth earns $100,000earns $80,000 CableSouth CableNorth eams $80,000 CableNorth earns $90,000 CO Low price CableSouth eans $130,000earns $90,000 CableSouth Figure: Pricing Strategy in Cable TV Market II) The Nash equilibrium in the cable TV market is when: O A. both firms set a high price and each earns $100,000 per month. O B. Cable North sets a high price and earns $80,000 per month, while Cab!eSouth sets a low price and earns $130,000 per month C. CableNorth sets a low price and earns $130,000 per month, while CableSouth sets a high price and earns $80,000 per month. D. both firms set a low price and each earns $90,000 per month.Explanation / Answer
1.Nash equilibrium exists when both parties set a higher price and earns 100,000.This is the optimal strategy when both firms are better off.
Answer-A
2.Positive externality exists when the benefits of an economic transformation are enjoyed by the third party not directly involved in the transaction.
Answer-C
3.C shows perfectly competitive curve with a perfectly elastic demand curve equal to the MR.