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?