2. For which of these goods is it likely that a private provider could profit in the long run by selling a socially efficient anount, selling all the units at the same price? "Long run" means a period long enough to include all setup costs, so that no costs are sunk. Explain and justify your answers. a[5] The service of a highravy that is never congested. b.[5] Oil-fired electricity. 3. A city has decided to pay a locally owned constroction firm to baild a new mile long bridge. The city will borrow to finance the construction and will pay for the loan and all operating costs by raising its property tax so that the anaual tax revenue will be $20M (M for million) higher during the 50 year expected lifetime of the bridge. The government expects that the demand curve for crossings over the bridge will be linear, with a choke price of $10. They plan to charge no toll and expect that there will be 8M crossings per year, only by city residents driving cars, and almost never any traffic congestion. In the problems below, except in part f, assume that the govemusent's expectations are correct. a[4] Find the total consumer surplus that drivers will get by crossing the bridge during a typical year. Show all your steps. b.[4] Find the average cost of the service provided by the bridge when no toll is charged. Show how you get your answer. Hint: Use the total cost in a year and the total output of the bridge in a year. c[3] Use the audios on vehicle costs to estimate the cost to the govemnsent (bridge oaner) from one additional crossing daring a typical year. d.[5] The local construction firm that the government would hire could have borrowed noney and used it to pay its own cost of bailding the bridge. The firm woald have had to pay $20M per year to maintain the bridge, collect the tolls, and repay the ban over a 50 year period. It could have charged a profit-maximizing toll of $5.00 per crossing. How many crossings of the bridge per year would there be in that case? How much profit would the firm get from this per year? Show all your steps. e[6] The firm's profit in part d is much bigger than the governmenr's profit if the govemunent operates the bridge without charging a soll. Explain why the total surplus for city residents (including the comstruction firm's owner and workers) would be higher if the city built and operated the bridge than if the firm operated it as in part d. How moch higher? Why does the firm's higher profit not matter for this conclusion? f[4] Suppose the numbers given in the problem above are only expected valoes and the government does not know for sure the cost of the bridge and the residents' demand curve for crossings. How should this uncertainty affect an estimate of the net benefit the city residents would get from the bridge project? Explain your