Refer to Scenario 13.1 below to answer the question(s) that follow.
SCENARIO 13.1: The government of Catalina Island 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. Universal Entertainment is interested in bidding for the right to provide cable service on Catalina Island. It has a constant average and marginal cost of $15 for providing cable service to each household.
Refer to Scenario 13.1. What is the most Universal Entertainment would bid for the franchise?
◦ $0
◦ $40,000
◦ $70,000
◦ $80,000
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