Question
Consider the possibility of building a bridge across a river. The bridge would cost $2 million to build (FC=$2 million) and nothing to maintain (MC=0).
Consider the possibility of building a bridge across a river. The bridge would cost $2 million to build (FC=$2 million) and nothing to maintain (MC=0). The following table given below illustrates the potential demand over the lifetime of the bridge:GRAPHa. What would be the profit-maximizing price that a company would charge? Would that be the efficient level of output? Why or why not? [Hint: Think of output in this case as the number of crossings across the bridge]b. Should the company build this bridge if it was interested in maximizing profit? Why or why not? [Hint: Find out whether it makes profit or loss upon building] c. If the government were to build the bridge, what price should it charge? d. Should the government build this bridge?GRAPH:
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