Suppose that Kenya Railways serves two major separate customers, namely: urban users and rural users of the railway line. The company can charge different prices to these two customers. Suppose that the total cost for running trips by Kenya Railways is given by the following cost function: C= 25+10QWhere:C = total costQ = total output of trips made by the railway line The inverse demand functions for the two customers are given as follows: P1 = 40-5Q1 P2 =90-2Q2Where:p1 = Price charged to urban users; and is number of trips by urban usersp2 = Price charged to rural users; and is number of trips by rural usersRequired:How many trips should Kenya Railway serve in each market and what price should the firm charge in each market? Compute the profits of Kenya Railways without price discrimination From your knowledge of the relationships between various costs of production, fill in the blanks of Table 1 below: Table 1QTCTFCTVCACMC0-----12960--- 2---1930-3----1100

Total Cost TC = 25+10Q Differentiate with respect to Q to find Marginal Cost MC = 10 Customer 1…

Answered: Suppose that Kenya Railways serves two…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that Kenya Railways serves two major separate customers, namely: urban users and rural users of the railway line. The company can charge different prices to these two customers. Suppose that the total cost for running trips by Kenya Railways is given by the following cost function: C= 25+10Q

Where:

C = total cost

Q = total output of trips made by the railway line

The inverse demand functions for the two customers are given as follows: P_{1 =}40-5Q₁

P₂ =90-2Q₂

Where:

p1 = Price charged to urban users; and is number of trips by urban users

p2 = Price charged to rural users; and is number of trips by rural users

Required:

How many trips should Kenya Railway serve in each market and what price should the firm charge in each market?
Compute the profits of Kenya Railways without price discrimination

From your knowledge of the relationships between various costs of production, fill in the blanks of Table 1 below:

Table 1

Q	TC	TFC	TVC	AC	MC
0	-	-	-	-	-
1	2960	-	-	-
2	-	-	-	1930	-
3	-	-	-	-	1100

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