### Bridge Construction and Pricing Strategy A company is considering building a bridge across a river. The bridge would cost $2 million to construct and nothing to maintain. Below is a table showing the anticipated demand over the bridge's lifetime: #### Table: Price per Crossing vs. Number of Crossings (in Thousands) | Price per Crossing | Number of Crossings (Thousands) | |--------------------|---------------------------------| | $8 | 0 | | $7 | 100 | | $6 | 200 | | $5 | 300 | | $4 | 400 | | $3 | 500 | | $2 | 600 | | $1 | 700 | | $0 | 800 | #### Discussion Questions: a. **Profit-maximizing Price**: If the company were to build the bridge, what would be its profit-maximizing price? Would that be the efficient level of output? Why or why not? b. **Profit Considerations**: If the company is interested in maximizing profit, should it build the bridge? What would be its profit or loss? c. **Government Pricing Strategy**: If the government were to build the bridge, what price should it charge? d. **Role of Government**: Should the government build the bridge? Explain. Students are encouraged to analyze the cost-benefit aspects, pricing strategies, and the implications of government intervention in public infrastructure projects using this data.
### Bridge Construction and Pricing Strategy A company is considering building a bridge across a river. The bridge would cost $2 million to construct and nothing to maintain. Below is a table showing the anticipated demand over the bridge's lifetime: #### Table: Price per Crossing vs. Number of Crossings (in Thousands) | Price per Crossing | Number of Crossings (Thousands) | |--------------------|---------------------------------| | $8 | 0 | | $7 | 100 | | $6 | 200 | | $5 | 300 | | $4 | 400 | | $3 | 500 | | $2 | 600 | | $1 | 700 | | $0 | 800 | #### Discussion Questions: a. **Profit-maximizing Price**: If the company were to build the bridge, what would be its profit-maximizing price? Would that be the efficient level of output? Why or why not? b. **Profit Considerations**: If the company is interested in maximizing profit, should it build the bridge? What would be its profit or loss? c. **Government Pricing Strategy**: If the government were to build the bridge, what price should it charge? d. **Role of Government**: Should the government build the bridge? Explain. Students are encouraged to analyze the cost-benefit aspects, pricing strategies, and the implications of government intervention in public infrastructure projects using this data.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:### Bridge Construction and Pricing Strategy
A company is considering building a bridge across a river. The bridge would cost $2 million to construct and nothing to maintain. Below is a table showing the anticipated demand over the bridge's lifetime:
#### Table: Price per Crossing vs. Number of Crossings (in Thousands)
| Price per Crossing | Number of Crossings (Thousands) |
|--------------------|---------------------------------|
| $8 | 0 |
| $7 | 100 |
| $6 | 200 |
| $5 | 300 |
| $4 | 400 |
| $3 | 500 |
| $2 | 600 |
| $1 | 700 |
| $0 | 800 |
#### Discussion Questions:
a. **Profit-maximizing Price**:
If the company were to build the bridge, what would be its profit-maximizing price? Would that be the efficient level of output? Why or why not?
b. **Profit Considerations**:
If the company is interested in maximizing profit, should it build the bridge? What would be its profit or loss?
c. **Government Pricing Strategy**:
If the government were to build the bridge, what price should it charge?
d. **Role of Government**:
Should the government build the bridge? Explain.
Students are encouraged to analyze the cost-benefit aspects, pricing strategies, and the implications of government intervention in public infrastructure projects using this data.
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