Refer to Scenario 13.2 below to answer the question(s) that follow.
SCENARIO 13.2: The government of Stratospheria is currently inviting investors to bid for the exclusive right to provide cable television service to its residents. The market demand for this service is
P=55-0.01
Q, where
Q is the number of households that would subscribe to the cable service and
P is the monthly fee charged to the subscribers. The associated marginal revenue curve is
MR=55-0.02
Q. Fun Cable Company is interested in bidding for the right to provide cable service in Stratospheria. It has a constant average and marginal cost of $5 for providing cable service to each household.
Refer to Scenario 13.2. What is the most Fun Cable Company would bid for the franchise?
◦ $0
◦ $62,500
◦ $75,000
◦ $112,500
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