Question

Suppose all individuals are​ identical, and their monthly demand for Internet access from a certain leading provider can be represented as p​ = 5 minusone half q where p is price in​ $ per hour and q is hours per month. The firm faces a constant marginal cost of​ $1. If the firm will charge a monthly access fee plus a per hour​ rate, the monthly access fee will equal

Answer 1

8 Hours

Step-by-step explanation:

Solution

The demand or Internet access from a certain leading provider can be represented as follows:

Demand

P = 5- 1/2q

The Marginal Cost = $1

Now

Under the discrimination price with two part tariff the producer will like to have a complete consumer surplus. He will produce till price = MC

Thus,

5- 1/2q = 1

4*2 = q

8 hours = q