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) |
|---|---|---|
| 5 | 180 | 60 |
| 10 | 120 | 120 |
| 15 | 60 | 180 |
(a) What is the equilibrium quantity after the competing platform closes? [1]
(b) State the equilibrium monthly price. [1]
(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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