Question
Six River Village Inc is the only firm providing services of wildlife park in the market. Its total cost is TC = 6Q and its
Six River Village Inc is the only firm providing services of wildlife park in the market.
Its total cost is TC = 6Q and its demand function is P=62-0.002Q, where Q is the
number of tickets sold and P is the price per ticket measured in dollars.
(i)Determine with diagram the price and quantity by which Six River Village Inc
will set to maximize its profit.
(ii)Calculate with diagram the size of profit, consumer surplus, producer surplus
and deadweight loss generated by Six River Village Inc's price-setting
behavior.
(iii)Suppose the government, concerned about the high price of Six River Village
Inc, is considering to set a price ceiling. Recommend to the policymakers a
feasible level of price ceiling that can significantly increases market efficiency
and keep Six River Village Inc in the market to provide its goods and services.
Discuss the rationales of your recommendation.
(15 Marks)
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