Question

Given: Verizon Total cost = $23 billion Opportunity cost of capital = 10% Annual cost =...

Given:

Verizon

Total cost = $23 billion

Opportunity cost of capital = 10%

Annual cost = $2.3 billion

Expected demand = q = 2,100,000 – 6P

1. Calculate the expected annual profit that Verizon will earn if they price at service at $30/month, $60/month or $100/month. At which price do they maximize profit?

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Homework Answers

Answer #1

Assuming that total cost included the annual cost as well as the opportunity cost so the cost is 23 billion = 2300000000

Yeary prices1 = 30*12= 360

Q = 2100000-6*360= 2097840

total revenue = p*q= 360 * 2097840=755222400= 7.55 billion

yearly price2= 60*12=720

Q= 2100000- 6*720

q= 2095680

total revenue= 1508889600= 15.08 billlion

Yearly price3= 100*12=1200

Q=210000-6*1200

q= 202800

total revenue= 243360000=24.3 billion

In 100/moth price the profit is maximized (24.3-23)= 1.3 billion....(answer)

Rest all were giving losses.

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