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. If Fun Cable Company were to be awarded the exclusive right to provide cable service in Stratospheria, how much profit would it earn?
◦ $0
◦ $62,500
◦ $75,000
◦ $112,500
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