Economics Story problem...please help?
Price per crossing # of crossings
$8 0
7 100,000
6 200,000
5 300,000
4 400,000
3 500,000
2 600,000
1 700,000
0 800,000
a. What is the profit maximizing price?
b. What is the efficient level of output? why?
c. If the firm is interested in maximizing profit, shout it build the bridge?
d. If the government was to build the bridge, what price should the government charge?
e. Should the government build the bridge? Why?
Answer:
Assume zero marginal cost per crossing (seems to be a public good problem anyway):
a. 4.
b. 800,000
c. Need information on cost of building bridge. If cost is below 1,600,000 then it pays to build the bridge.
d. 0.
e. If cost is below 8.4 million, government should build the bridge.
you need data on costs to answer this.
The most efficent would be 4 dollors 400,000 crossing because thats the most profit. Not terribly sure on rest of answers. don't seem to have enough information with it. If they should build a bridge or not, sure it makes them money but you have no idea the up keep or cost of making it.
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