Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question 1 Sleigh Rides {55 points] There are two companies licensed to provide winter sleigh rides to tourists in Finland. The government dictates how many
Question 1 Sleigh Rides {55 points] There are two companies licensed to provide winter sleigh rides to tourists in Finland. The government dictates how many tourists per clav can go on a sleigh ride [to limit the environmental damage}, which is currently capped at 150 total tourists per day. ll'our compa ny, Finnish Line Sleigh Rides {FL}, is in heated competition {pun intended because it's bloody cold in Finland at Christmastime] with Saint Nicholas Reki Hides [SN]. You both offer essentially identical tours. The market inverse demand curve is 9:30040 Where {1 is tourists [passengers] per day and P is price per tourist in euros [since Finland Idopted the euro in 2002}. The firms\" marginal costs per tourist are MCFL = 40 MCSH = 20 A. [5 points] What is the market structure? Explain. B. [15 points] What price should each rm charge? How many tourists will each C. firm serve? [20 points] Assume that collusion is legal if you pay a tax to the government. Per the tax schedule, the tax for your company [FL] would be 10 per tourist and for SN would be 30 per tourist Would collusion occur? Explain and justify. . [15 points] The Finnish government wants to encourage more tourism and has passed the Donder 8t Blitzen Act [or Thunder 8: Lightning Act if you prefer]. which eliminates the license requirement for sleigh operators and also eliminates the cap on number of daily rides that can be provided. The owner of SN has decided to cater to more upscale customers. which will increase her marginal costs to 80 per tourist. whereas you [FL] want to keep sleigh rides accessible to "the people\" and will not change anything about your business. FULL]:r explain what happens in this market Assume that the collusion suggested in Part C does NOT occur
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started