Question - Dim Witt is the county commissioner of Clueless County. He decided to institute tolls for local ferry boat passengers. After the tolls had been in effect for four months, Astra Astute, county accountant, noticed that collecting $1,450 in tolls incurred a daily cost of $1,800. The toll is $0.50 per passenger.
a. How many people are using the ferry each day?
b. If the $1,800 cost is entirely fixed, how much must each passenger be charged for the toll process to break even? How much each passenger must be charged for the toll process to make a profit of $250 per day?
c. Assume that only 80 percent of the $1,800 is fixed and the remainder varies by passenger. If the toll is raised to $0.60 per person, passenger volume is expected to fall by 10 percent. If the toll is raised and volume falls, will the county be better or worse off than it is currently and by what amount?
d. Assume that only 80 percent of the 1,800 is fixed and the remainder varies by passenger. If passenger volume will decline by percent for every $0.20 increase from the current $0.50 rate, at what level of use and toll amount would the county first make a profit?
e. Discuss the saying "We may be showing a loss, but we can make it up in volume.