A television network is considering whether to add one or both programs to its upcoming fall lineup. The only two time slots remaining are sponsored by Colgate, which is under contract to pay the network 10 cents for each viewer who watches the program, out of which the network would have to cover its production costs of $400,000 per episode. (Viewership can be estimated accurately with telephone surveys.) Any time slot the network does not fill with NFL Sunday Night Football or Masterpiece will be filled by infomercials for a weight-loss program, for which the network incurs no production costs and for which it receives a fee of $500,000. Viewers will receive $5 million in economic surplus from watching each installment of the infomercial.



a. How will the network fill the two remaining slots in its fall lineup?


The network will fill the two remaining slots with
(Click to select)
.


b. Is this outcome socially efficient?


The outcome is
(Click to select)
.



c. By how much would total economic surplus be higher if each episode of Masterpiece were shown on PBS free of charge than if it were shown by a profit-maximizing video streaming service that charged consumers a fixed fee to watch each episode? (Hint: To find the price charged by a profit-maximizing streaming video service, recall that the service will choose the price at which the marginal revenue from an additional viewer is equal to the marginal cost of an additional viewer, noting that once the show has been produced, the marginal cost of an additional viewer is zero.)


Total economic surplus would be $
million higher per episode.