This is the full question if I do not include the complete question then it can not be answered properly.

Imagine a country where bus and train trips between two main cities are both completely provided by private companies, and, from a consumer perspective, these services are perceived as substitutes. The demand for bus trips is:

D1= 2,500 - 250P1+ 50P2+ 2Y(1)

WhereD1is annual demand for bus trips,P1is price of bus trips,P2is price of train trips and Y is average annual income. Assume the supply of bus trips by the industry can be described by:

S1= 250P1(2)

WhereS1is the number of bus trips, and the market clears so:

D1= S1(3)

Assume the average annual income, Y, is $70,000 and the price of train trips isP2= $350. Further, assume the market always clears, there are no empty buses and trains, and producers are competitive. Ignore externalities such as pollution.

Answer the following questions:

Section A

1.What is the equilibrium price of bus trips?

2.How many bus trips are provided and purchased?

3.Present the relevant diagram.

4.Calculate the producer surplus for the bus trips providers (bus companies).

Section B

Assume the government puts a $100 tax on each bus trip, which is levied on bus companies. Answer the following questions:

1.What is the new price of bus trips to consumers?

2.What is the new price of bus trips to bus companies?

3.How many bus trips are now supplied and bought?

4.Present the relevant diagram.

5.How much tax revenue is raised?

Section C

The government decided not to apply the tax, and a large company who can dominate the market starts to offer trips. Its supply curve (called marginal cost curve) for bus trips is different than the supply curve for the previous companies in the market:

S2= 350 + 50P1(4)

1.What will be the new price of bus trips with the new supplier in the market?

2.How many bus trips will now be provided by the bus companies operating before the large company entered the market?

3.How many bus trips will now be provided by the new large company?

4.How many bus trips will now be produced in total?

5.Present the relevant diagram

Section D

Explain how this type of market structure could affect the market performance. How would this affect the welfare of consumers?

Note: Presentation, including Introduction and References