Marginal revenue curves associated with two demand curves

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Reference no: EM13898529

Travelers driving through Gotham City can use a freeway or the Cross Town Toll way to get through the city. The toll way charges $1.00 per car during the morning rush hour (6-9 AM) and the afternoon rush hour (4-7 PM), and the toll is $0.40 per car at all other times. The weekly demand for using the toll way during rush hour is Q1 = 800 - 200P1 where quantity demanded is measured in thousands of cars, and the weekly demand for the non-rush hour period is Q2 = 2000 - 1000P2.Gotham City's marginal cost of operating the toll way is MC = 0.02 + 0.001Q per car.

a. What are the marginal revenue curves associated with the two demand curves?

b. Has the city set the profit maximizing tolls for the Cross Town Toll way? If not, do the current tolls generate too much or too little traffic on the toll way?

Reference no: EM13898529

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