Table 1 shows the market for a monthly video-streaming subscription. A competing platform closes, but firms' costs do not change. Monthly price ($) Quantity...

Assessment: Economics 9214 | Paper 2 Mock 01 | Written Paper 2 Subject: Economics - 9214

Question 1 Report

Table 1 shows the market for a monthly video-streaming subscription. A competing platform closes, but firms' costs do not change.

Monthly price ($)Quantity demanded after closure (thousand)Quantity supplied (thousand)
518060
10120120
1560180

(a) What is the equilibrium quantity after the competing platform closes? [1]
(b) State the equilibrium monthly price. [1]

Answer Details

(a) Equilibrium quantity: 120 thousand subscriptions. [1]

The equilibrium quantity is where demand equals supply. At the relevant price, both are 120 thousand subscriptions.

(b) Equilibrium monthly price: $10. [1]

At $10 per month, quantity demanded after the competitor closes is 120 thousand and quantity supplied is also 120 thousand.

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