The travel time (t) on the segment of a highway connecting city A with city B has been observed to follow the equation below, as a function of traffic flow (v): t = 15 + 0.02v, where t and v are measured in minutes and vehicles per hour, respectively. The demand function for travel connecting the two cities is v = 3500 – 120t.
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The travel time (t) on the segment of a highway connecting city A with city B
has been observed to follow the equation below, as a function of traffic flow
(v): t = 15 + 0.02v, where t and v are measured in minutes and vehicles per
hour, respectively. The demand function for travel connecting the two cities is
v = 3500 – 120t.
a) Determine the equilibrium time and traffic flow.
b) If the length of the highway segment is 30 kilometres, what is the average
speed of vehicles traversing this segment at equilibrium conditions?
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- Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100 - e1 MAC2 = 100 - 4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. [1] In an unregulated environment how many units of emissions does each firm emit? Firm 1’s unregulated level of emissions ____________ Firm 2’s unregulated level of emissions ____________ Total unregulated level of emissions ______________A large company in the communication and publishing industry has quantified the relationship between the price of one of its products and the demand for this product as Price=160−0.02×Demand for an annual printing of this particular product. The fixed costs per year (i.e., per printing)=$47,000 and the variable cost per unit=$40. What is the maximum profit that can be achieved? What is the unit price at this point of optimal demand? Demand is not expected to be more than 4,000 units per year. The maximum profit that can be achieved is $? (Round to the nearest dollar.) The unit price at the point of optimal demand is $? per unit. A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q = +15,000 - 2.80P + 150A + 0.3Ppc + 0.35Pm + 0.2Pc The variables and their assumed values are Q = Quantity P = Price of basic model = 7,000 A = Advertising expenditures (in thousands) = 52 Ppc = Average price of a personal computer = 4,000 Pm = Average price of a minicomputer = 15,000 Pc = Average price of a leading competitor’s workstation = 8,000 Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm’s marketing and pricing policies?
