A company is considering building a bridge across a river. The bridge would cost $2million to build and nothing to maintain. The following table shows the company'santicipated demand over the lifetime of the bridge:Price per crossing ($)Number of crossing, in thousands807100620053004400350026007000800a. If the company were to build the bridge, what would be its profit-maximizing price?Would that be the efficient level of output? Why or why not?b. If the company is interested in maximizing profit, should it build the bridge? Whatwould be its profit or loss?c. If the government were to build the bridge, what price should it charge?d. Should the government build the bridge? Explain.

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Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter6: Simple Pricing

Section: Chapter Questions

Problem 9MC

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Heathrow Airport Holdings is the private company that operates Heathrow Airport in London. Suppose the company recently commissioned your consulting team to prepare a report on traffic congestion at Heathrow. Your report indicates that Heathrow is more likely to experience significant congestion between July and September than any other time of the year.Based on your estimates, demand is Q1d = 600 – 0.25P, where Q1d is quantity demanded for runway time slots between July and September. Demand during the remaining nine months of the year is Q2d = 220 – 0.1P, where Q2d is quantity demanded for runway time slots.The additional cost Heathrow Airport Holdings incurs each time one of the 80 different airlines utilizes the runway is £1,100 provided 80 or fewer airplanes use the runway on a given day. When more than 80 airplanes use Heathrow’s runways, the additional cost incurred by the company is £6 billion (the cost of building an additional runway and terminal). Heathrow Airport Holdings…
20. Heathrow Airport Holdings is a private company that operates Heathrow Airport in London. Suppose the company recently commissioned your consulting team to prepare a report on traffic congestion at Heathrow. Your report indicates that Heathrow is more likely to experience significant congestion between July and September than at other times of the year. Based on your estimates, demand is Qd1 = 600 − 0.25P , where Qd1 is quantity demanded for runway time slots between July and September. Demand during the remaining nine months of the year is Qd2 = 220 − 0.1P , where Qd2 is quantity demanded for runway time slots. The additional cost Heathrow Airport Holdings incurs each time one of the 80 different airlines utilizes the runway is £1,100 provided 80 or fewer airplanes use the runway on a given day. When more than 80 airplanes use Heathrow’s runways, the additional cost incurred by the company is £6 billion (the cost of building an additional runway and terminal). Heathrow Airport…
If demand and supply of Chinese coal areQd = 60 − 0.5P Qs = −2 + 2P Then, Calculate the dead weight loss of the subsidy, if the subsidy cost is 47.6
The per-week (inverse) demand for use of the Øresund Bridge between Denmark and Sweden is P = 13 − 0.15Q during peak traffic periods and P = 10 − 0.1Q during off-peak hours, where Q is the number of cars crossing the bridge in thousands and P is the toll in euros. If the marginal cost of using the bridge is MC = 5 + 0.2Q, what is the optimal peak load toll and off-peak load toll for crossing the bridge?
In 2008 a car manufacturer sold 10,000 units of its leading model at N10,000. After deducting operating costs, dealers’ costs and all other variable cost this produced a surplus of N4,000 on each unit sold. Due to the recession, sales slump in early 2009 and the marketing director advises a price cut of N2000, arguing that this makes sense because the Own Price Elasticity of demand is –1.5. Calculate the amount of surplus that would be generated by the manufacturer in 2009 if the marketing director is correct and her recommendation is accepted.
General Motors, the automobile manufacturing company, recently ran an advertisement for its cars. It offered a 21% discount on its suggested retail price on all of its cars only to “current competitive owners” - anyone who is currently owning or leasing a NON-General Motors car. Customers must show proof of ownership (or lease) of a 2001 model year or newer non-GM vehicle dated at least 30 days prior to the sale of a new General Motors car. 1) How does General Motors benefit from selling cars at a 21% discount to non-GM owners? Explain why this pricing strategy increases General Motors’ revenues and profits versus selling all General Motors cars at one price. Be sure to use economic concepts used in the class for your answer. 2) Why does General Motors require proof of ownership (or lease) of a non-GM vehicle? Explains how this benefits General Motors.
TNBest is the only electricity company in a suburban area. Suppose that the demand for electricity for this area is ? = 500 − 10? and the cost of producing electricity is ?? = 500 + 2?.(i) If the city council want to ensure that TNBest doesn’t lose money, comment on the lowest price they can impose and TNBest’s profit and output level with this new price.
For problems 1 – 4: The Dolan Corporation, a maker of small engines, determines that in 2019 the demand curve for its product is P = 2,000 - 50Q where P is the price (in dollars) of an engine and Q is the number of engines sold per month. To sell 30 engines per month, what price would Dolan have to charge? A.4500 b.1000 c.500 d.450
You plan to purchase a car for $28,000. Its market value will decrease by 20% per year. You have determined that the IRS-allowed mileage reimbursement rate for business travel is about right for fuel and maintenance at $0.485 per mile in the first year. You anticipate that it will go up at a rate of 10% each year, with the price of oil rising, influencing gasoline, oils, greases, tires, and so on. You normally drive 15,000 miles per year. What is the optimum replacement interval for the car? Your MARR is 9%.
What are the various factors which may influence the demand for intermediate goods like cables? Explain the most appropriate method of forecasting the demand for such an item.?
Discuss ONE key federal law the FTC uses to regulate violators.
Urban transit systems, especially those with rail systems, typically experience significant economies of scale in operation. Consider the transit system data in Table 11.4. Note that the quantity is in millions of riders.

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