Reference no: EM132156934
A single firm owns the only subway system in a large city. The firm has total costs in the short run given by: TC = 0.005q^2 + q + 32 q ≥ 2 where q is the number of riders per minute using the subway and TC is the total cost per minute in dollars.
The demand for subway rides is given by:
P = 2.2 - 0.005q
where q is the number of riders per minute using the subway and P is the price charged to each consumer in
dollars. Questions 31 through 35 concern this subway system.
To maximize profit, what price will the firm charge?
If the firm maximizes profits, what will be the value of profits per minute?
If the government decides to regulate the subway and requires the firm to charge a price that reduces economic profits to zero, what price will be charged?
When the government regulates the subway as described in Question 33, what is the change in the total gain to society (per minute) in moving from a profit-maximizing monopoly to a regulated monopoly?
Now the government decides to take over the subway and operate it at a loss by charging price equal to marginal cost. What price will be charged (to the nearest penny)?