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1. The San Francisco Ferry (SFS) has a monopoly on (water) travel between Oakland and downtown San Francisco. SFS serves two groups of consumers: locals
1. The San Francisco Ferry (SFS) has a monopoly on (water) travel between Oakland and downtown San Francisco. SFS serves two groups of consumers: locals with demand PL = 48 -0.1QL, and MRL = 48 - .2QL and tourists with demand PT = 60 - 0.1QT and MRT = 60 - 0.2QT. If the demand curves are added horizontally, they yield a marginal revenue curve MR = 54 - 1Q. SFS's cost of providing rides between San Fran and Oakland is C(Q) = 200 + 0.035Q2, where Q = QL + QT. Given C(Q), MC = 20 + 0.07Q a) If the firm cannot price discriminate: equilibrium quantity: equilibrium price: revenues: costs: b) If the firm cannot price discriminate: # ferry rides sold to locals: consumer surplus for locals: # ferry rides sold to tourists: consumer surplus for tourists: marginal cost (MC) at the equilibrium quantity taken to both markets: c) If the firm CAN price discriminate: firm's profits: # ferry rides sold to locals: price charged to locals: # ferry rides sold to tourists: price charged to tourists: consumer surplus for locals: consumer surplus for tourists: 1. The San Francisco Ferry (SFS) has a monopoly on (water) travel between Oakland and downtown San Francisco. SFS serves two groups of consumers: locals with demand PL = 48 -0.1QL, and MRL = 48 - .2QL and tourists with demand PT = 60 - 0.1QT and MRT = 60 - 0.2QT. If the demand curves are added horizontally, they yield a marginal revenue curve MR = 54 - 1Q. SFS's cost of providing rides between San Fran and Oakland is C(Q) = 200 + 0.035Q2, where Q = QL + QT. Given C(Q), MC = 20 + 0.07Q a) If the firm cannot price discriminate: equilibrium quantity: equilibrium price: revenues: costs: b) If the firm cannot price discriminate: # ferry rides sold to locals: consumer surplus for locals: # ferry rides sold to tourists: consumer surplus for tourists: marginal cost (MC) at the equilibrium quantity taken to both markets: c) If the firm CAN price discriminate: firm's profits: # ferry rides sold to locals: price charged to locals: # ferry rides sold to tourists: price charged to tourists: consumer surplus for locals: consumer surplus for tourists
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