Suppose that News Corp., which controls the United States’ largest satellite-to-TV broadcaster, is contemplating launching a Space-way satellite that could provide high-speed Internet service. Prior to launching the Space-way satellite, suppose that News Corp. used least squares to estimate the regression line of demand for satellite Internet services. The best-fitting results indicate that demand is Qdsat = 152.5 – .8 Psat + 1.2 P DSL + .5 P cable (in thousands), where Psat is the price of satellite Internet service, PDSL is the price of DSL Internet service, and Pcable is the price of high-speed cable Internet service. Suppose that after the FCC’s ruling the price of DSL, PDSL, is $25 per month and the monthly price of high-speed cable Internet, Pcable, is $50. Furthermore, News Corp. has identified that its monthly revenues need to be at least $15 million to cover its monthly costs. If News Corp. set its monthly subscription price for satellite Internet service at $55, would its revenue be sufficiently high to cover its cost? Is it possible for News Corp. to cover its cost given the current demand function? Justify your answer.
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