Reference no: EM132158867

A single firm owns the only subway system in a large city. The firm has total costs in the short run given by: TC = 0.005q^2 + q + 32 q ≥ 2 where q is the number of riders per minute using the subway and TC is the total cost per minute in dollars. The demand for subway rides is given by: P = 2.2 - 0.005q where q is the number of riders per minute using the subway and P is the price charged to each consumer in dollars. Questions 31 through 35 concern this subway system.

• To maximize profit, what price will the firm charge?
• If the firm maximizes profits, what will be the value of profits per minute?
• If the government decides to regulate the subway and requires the firm to charge a price that reduces economic profits to zero, what price will be charged?
• When the government regulates the subway as described in Question 33, what is the change in the total gain to society (per minute) in moving from a profit-maximizing monopoly to a regulated monopoly?
• Now the government decides to take over the subway and operate it at a loss by charging price equal to marginal cost. What price will be charged (to the nearest penny)?