Reference no: EM133411052
Case: A railway company has just obtained an exclusive contract for a new destination. Currently, there is no other company that markets an equivalent product.
P=300 - 2Q
C(Q)=100+60Q+4Q2
where P: represents the price and Q : a train ticket to that destination.
Question 1:
What price and quantity maximizes profit for this firm? You must show your calculations.
Question 2:
Calculate the profit of the firm with the combination chosen in the previous question.
Question 3:
Represent this firm graphically while indicating the various surpluses.
Question 4:
Calculate consumer surplus, producer surplus, and total surplus.
Question 5:
If any train company could offer the same route, what would be the equilibrium price and quantity?
Question 6:
Calculate consumer surplus, producer surplus, and total surplus.
Question 7:
Comparing the different surpluses, explain the difference between the initial situation and the final situation. Who wins, who loses and why? (3 points) Calculate the deadweight loss.