Determining the profit maximizing price


Problem: A firm is considering building a bridge. The cost to build the bridge is $2 million with no maintenance costs. The following table shows demand for bridge:
 
Price per crossing    # of crossings
$8                                   0
7                                   100
6                                   200
5                                   300
4                                   400
3                                   500
2                                   600
1                                   700
0                                   800
 
Question 1: What is the profit maximizing price?

Question 2: What is the efficient level of output?  why?

Question 3: If the firm is interested in maximizing profit, should it build the bridge?

Question 4: If the government was to build the bridge, what price should the government charge?

Question 5: Should the government build the bridge? Why?

Solution Preview :

Prepared by a verified Expert
Macroeconomics: Determining the profit maximizing price
Reference No:- TGS01746645

Now Priced at $25 (50% Discount)

Recommended (93%)

Rated (4.5/5)