8. A company is considering building a bridge across a river. The bridge would cost €12 million to build and nothing to maintain. The following table shows the com- pany's anticipated demand over the lifetime of the bridge: Number of crossings (in thousands) Price per crossing (€) €8 7 100 200 300 400 500 600 700 800 a. If the company were to build the bridge, what would be its profit-maximizing price? Would that be the effi- cient level of output? Why or why not? b. If the company is interested in maximizing profit, should it build the bridge? What would be its profit or loss? c. If the government were to build the bridge, what price should it charge for passengers and vehicles to use the bridge? Explain your answer. d. Should the government build the bridge? Explain. 6543210

8. A company is considering building a bridge across a river. The bridge would cost €12 million to build and nothing to maintain. The following table shows the com- pany's anticipated demand over the lifetime of the bridge: Number of crossings (in thousands) Price per crossing (€) €8 7 100 200 300 400 500 600 700 800 a. If the company were to build the bridge, what would be its profit-maximizing price? Would that be the effi- cient level of output? Why or why not? b. If the company is interested in maximizing profit, should it build the bridge? What would be its profit or loss? c. If the government were to build the bridge, what price should it charge for passengers and vehicles to use the bridge? Explain your answer. d. Should the government build the bridge? Explain. 6543210

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter5: Elasticity

Section: Chapter Questions

Problem 7SCQ: What would the gasoline price elasticity of supply mean to UPS or FedEx?

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A company is considering building a bridge across ariver. The bridge would cost $2 million to build andnothing to maintain. The following table shows thecompany’s anticipated demand over the lifetime ofthe bridge:Price per CrossingNumber of Crossings,in Thousands$8 07 1006 2005 3004 4003 5002 6001 7000 800a. If the company were to build the bridge, whatwould be its profit-maximizing price? Would thatlevel of output be efficient? Why or why not?b. If the company is interested in maximizing profit,should it build the bridge? What would be itsprofit or loss?c. If the government were to build the bridge, whatprice should it charge?d. Should the government build the bridge?Explain.
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