What price-quantity combination would maximize profit

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You are the chief economist of the County Regulatory Commission. The local cable TV monopoly franchise is regulated. The consulting firm provides the long run total cost and demand function estimates for the franchise:

LTC = Q3 – 8Q2 + 50Q and P = 140 - 50Q

Where Q represents thousands of monthly subscribers and P is monthly price.

a) If the franchise were not regulated what price-quantity combination would maximize profit?

b) Now find the price-quantity combination if a regulatory policy of average cost pricing is imposed.

c) Given your answers to a and b, calculate the change in consumers’ surplus.

Reference no: EM131166567

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