Acable 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

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.

"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.

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