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Question 4 A highway was constructed by the federal government and rented to a private rm that is in charge of managing it. Each week

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Question 4 A highway was constructed by the federal government and rented to a private rm that is in charge of managing it. Each week the rm has to pay the government $19,000 dollars. The marginal cost of managing the highway is 0. The weekly demand (measured in the number of cars) for the highway is D(p) = 200 0.119, where p is the price to enter the highway. 1. What is the prot maximizing entrance price that the rm should set (ignore integrality requirements)? What is the corresponding quantity of cars? 2. The government imposes a regulation on the rm that requires it to follow \"average-totalcost pricing\"1 which means that the price set by the rm should equal to its ATC (weekly cost divided by number of cars per week). Given this, what price should the rm set to maximize its prot? What is the number of cars that the rm should allow onto the highway each week (suppose the rm is encouraged to choose a higher quantity if several quantities satisfy the regulation simultaneously)? Does the regulation increase the total surplus (driver surplus plus rm prot)? 3. The noise on the highway is a nuisance to homeowners who reside nearby. It is estimated that the weekly cost to homeowners of this nuisance is C(q) = 5912, where q is the number of cars on the highway. What is the welfare maximizing quantity of cars that should be a]lowed on the highway each week? 1 Does the regulation in part (2) increase welfare of this economy compared to part (1)

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