Question

The accompanying table shows a small community's demand for monthly subscriptions to a streaming movie service. Assume that only two firms (Nextflix and Flixbuster) sell in this market, that each firm offers the same quality of service and movie selection, and that each firm's marginal cost is constant and equal to 0 (zero) due to excess capacity.

Price/Month (P) Number of Customers (Q) Total Revenue/Month (TR)
$10 0 $0
$9 100 $900
$8 200 $1,600
$7 300 $2,100
$6 400 $2,400
$5 500 $2,500
$4 600 $2,400
$3 700 $2,100
$2 800 $1,600
$1 900 $900
$0 1,000 $0

If the two firms operating in this market agreed to each supply one-half of the quantity a monopolist would supply, the contract would specify that:

a) Nextflix supplies zero subscriptions and Flixbuster supplies 500 subscriptions.
b) Nextflix supplies 250 subscriptions and Flixbuster supplies 250 subscriptions.
c) Flixbuster supplies 400 subscriptions and Nextflix supplies 100 subscriptions.
d) Nextflix supplies 400 subscriptions and Flixbuster supplies 100 subscriptions.
e) Flixbuster supplies 500 subscriptions and Nextflix supplies zero subscriptions.

Answer 1

The correct answer is (b) Nextflix supplies 250 subscriptions and Flixbuster supplies 250 subscriptions.

Step-by-step explanation:

Solution

Now,

A monopolist would supply where the total revenue is Maximum

So, quantity produced = 500 where each will produce 500/2

=250 units

Therefore from the given question stated as, If the two firms operating in this market agreed to each supply one-half of the quantity a monopolist would supply, the contract would specify that: Nextflix supplies 250 subscriptions and Flixbuster supplies 250 subscriptions.