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.
A company is considering building a bridge across a
river. The bridge would cost $2 million to build and
nothing to maintain. The following table shows the
company’s anticipated demand over the lifetime of
the bridge:
Number of Crossings,
in Thousands
$8 0
7 100
6 200
5 300
4 400
3 500
2 600
1 700
0 800
a. If the company were to build the bridge, what
would be its profit-maximizing price? Would that
level 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 its
profit or loss?
c. If the government were to build the bridge, what
price should it charge?
d. Should the government build the bridge?
Explain.
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