Question

A cable company can add a subscriber for​ ________ and a market failure occurs because the price charged​ ________.
A. nearly zero marginal​ cost; is extortionist
B. less than average​ cost; reduces consumer surplus
C. average variable​ cost; increases producer surplus
D. nearly zero marginal​ cost; exceeds marginal cost

Answer 1

Answer: The correct answer is "D. nearly zero marginal​ cost; exceeds marginal cost".

Explanation: A cable company can add a subscriber for​ nearly zero marginal cost and a market failure occurs because the price charged​ exceeds marginal cost.

This happens because the cost of adding one more subscriber is almost nil.

Answer 2

Answer:

"A"

Explanation:

One of the major advantages of service companies like a cable company is that apart from the initial set up cost , subsequent cost of production of services are always at minimal as they basically enlist a new customer on an existing platform of service provision.

We also need to know that market failure could arise as a result of abuse of power or position in a market economy. When the price charged by a service provider becomes too exorbitant , there is a threat of potential market failure.