Determine how many cars would cross the bridge

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Reference no: EM13209281

The demand equation for crossing the G.W.Bridge in New York City is P = 50-0.0001Q where P is the toll at the bridge and Q is the number of vehicles that cross the bridge every day.

a. Compute the toll that would maximize revenue for the state of New York. At this toll, how many cars would cross the bridge?

b. What is the price elasticity at this toll?

c. Also illustrate this price/quantity combination in a graph with demand curve and marginal revenue curve.

d. Suppose the company in charge of the maintenance of the bridge successfully negotiates a 20% increase in its annual fee. The State of New York hires you to advise them how to cover this cost. Would you advise them to raise the toll you computed in part a)? (Yes, or No, explain your answer). Would you advise them to raise revenue some other way?

Reference no: EM13209281

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