1. (15 points) The Suez Canal

The Suez Canal Authority operates the Suez Canal to maximize profits for the Egyptian government.Tolls for using the Suez Canal are imposed based the number of twenty-foot equivalent units (TEUs)on the ship.

Daily demand for the Suez Canal is estimated to be:

P(Q) = 140 - 0.0085Q

where P is the canal toll charged per TEU, and Q is the quantity of TEUs traveling through the Suez Canal per day,

The Suez Canal Authority has estimated its total cost function to be:

TC(Q) = 40,000 + 50Q

where Q is the number of TEU passing through the canal per day.

1. (5 points) Determine the profit-maximizing volume of TEUs for the Suez Canal Authority. Answers may be expressed in either integer or non-integer values.
2. (5 points) Using your solution above, forecast the daily profits of the Suez Canal Authority.
3. (5 points) What happens to the profit-maximizing volume of TEUs for the Suez Canal Authority if its daily fixed costs increase from $40,000 to $75,000?

(7 points) ATMs

Banco de Isthmus in Sevilla, Spain, currently charges ?1.00 per transaction at its ATMs. To determine if the bank should raise its price, the Banco de Isthmus managers experimented with several different prices (in ?0.25 increments) at selected ATMs. The marginal cost of an ATM transaction is ?0.50. The following table shows the usage of the ATMs as a function of the ATM fee in the experiment.