A company is considering building a bridge across a river.

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QUESTION:

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 companys anticipated demand over the lifetime of the bridge:Price per CrossingNumber of Crossings, in Thousands$8071006200530044003500260017000800a.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.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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QUESTION:

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 companys anticipated demand over the lifetime of the bridge:Price per CrossingNumber of Crossings, in Thousands$8071006200530044003500260017000800a.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.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.

ANSWER:

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Total revenue is the amount of money generated by selling the total quantity of products and services. It is computed by multiplying the total number of goods and services sold by pricing such products and services. The gain in income from selling one more unit of an item or service is marginal revenue.

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