Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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:

image text in transcribed
Price Quantity (in Thousands $8 V 100 6 200 5 300 4 400 3 500 2 600 700 800

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Rethinking Macroeconomics

Authors: John F McDonald

2nd Edition

1000434699, 9781000434699

More Books

Students also viewed these Economics questions

Question

Clarifying the process to be used for advising management of delays

Answered: 1 week ago