Important information about profit maximizing price
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
a. What is the profit maximizing price?
b. What is the efficient level of output? why?
c. If the firm is interested in maximizing profit, should it
build the bridge?
d. If the government was to build the bridge, what price
should the government charge?
e. Should the government build the bridge? Why?
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