BUIL1149 – PROPERTY ECONOMICS TUTORIAL WEEK 7 MONOPOLY AND MONOPOLISTIC COMPETITION Question 1 The government has recently privatised the operation of a newly constructed bridge that provides the only road link between a resort island and the mainland. The daily demand curve for the toll bridge is given by: Q = 3000 - 5P where: Q represents the daily number of bridge crossings and P represents the bridge toll expressed in cents per crossing. The daily fixed cost of the bridge tolling operation (i.e. depreciation, insurance plus contract labour) is $500 dollars (i.e. 50000¢). Finally, suppose the total variable cost curve is given by: TVC = 350Q where: TVC measures total variable cost in cents and Q is defined as before. Required: (a) From the information provided above, complete the following table: P Q TR TC MR MC ATC Profit 600¢ 575¢ 550¢ 525¢ 500¢ 475¢ 450¢ 425¢ 400¢ 375¢ 350¢ 325¢ (b) Use the marginal approach to determine the profit-maximising number of bridge crossings. What is the toll rate at this point? What is the maximum profit the bridge operator earns? (c) Construct a graph of TR and TC to determine the profit-maximising number of bridge crossings. Is this consistent with your findings in (b)? This study source was downloaded by 100000846856745 from CourseHero.com on 03-26-2023 06:52:10 GMT -05:00 https://www.coursehero.com/file/75917440/Tutorial-Week-7pdf/ (d) i. ii. iii. What is consumer surplus under perfect competition? What is consumer surplus under monopoly? How much better off would society be if the bridge operator were forced - through government regulation - to price efficiently? At this price, also determine the loss that the bridge operator would incur daily. (e) What is price discrimination and how might the bridge operator implement this? Question 2 Compare and contrast Perfectly and Monopolistically Competitive markets. This study source was downloaded by 100000846856745 from CourseHero.com on 03-26-2023 06:52:10 GMT -05:00 https://www.coursehero.com/file/75917440/Tutorial-Week-7pdf/ Powered by TCPDF (www.tcpdf.org)