Graph WTP vs content and explain cap

Q: Graph WTP vs content and explain cap

This question evaluates understanding of piecewise linear functions, marginal analysis, and the economic interpretation of willingness-to-pay, within the Statistics & Math domain for a Data Scientist role.

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Question

Willingness-to-Pay (WTP) vs. Content Quantity

Context

Assume the number of available shows is a nonnegative quantity S (S ≥ 0). A customer's maximum willingness to pay (WTP) increases linearly with S from $0 at 0 shows to$ 20 at 40 shows, and is capped at $20 for any higher content amounts.

Tasks

Sketch (conceptually) the WTP-versus-content curve and write its piecewise functional form.
What is the marginal WTP increase per additional show for S < 40?
Explain why extrapolating the line upward beyond 40 is incorrect here and what market reality the cap represents.

Graph WTP vs content and explain cap

Willingness-to-Pay (WTP) vs. Content Quantity

Context

Tasks

Solution

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Graph WTP vs content and explain cap

Overview

Willingness-to-Pay (WTP) vs. Content Quantity

Context

Tasks

Solution

Comments (0)