Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 5, Problem 8QP
To determine
Toll prices and freeway space.
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Suppose there exists a costless way to charge drivers on the freeway. Under this costless system, tolls on the freeway would be adjusted according to traffic conditions. For example, when traffic is usually heavy, as it is from 6:30 a.m. to 9:00 a.m. on a weekday, the toll to drive on the freeway would be higher than when traffic is light. In other words, freeway tolls would be used to equate the demand for freeway space with its supply. Would you be in favor of such a system to replace our current (largely zero price) system? Explain your answer.
Suppose that you are in charge of a toll bridge over the Mississippi River. The demand for
bridge crossing Q is given by the following:
2P = 20 - Q
a) How many people would cross the bridge if there were no toll? (YOU MUST SHOW
YOUR WORK TO RECEIVE CREDIT)
b) The toll bridge operator is considering setting up a price of $5.00. At that price, how
many people will cross the bridge? (YOU MUST SHOW YOUR WORK TO RECEIVE
CREDIT)
c) How many people would cross the bridge if the toll is set at $10.00? (YOU MUST
SHOW YOUR WORK TO RECEIVE CREDIT)
Suppose that managers at Honda are deciding how to price the new Honda Accord. The managers estimate that their total costs
increase by $20,000 for each car they produce. They also estimate the demand curve they face; it is described by the equation:
Q = -0.4 P + 16,000,
where Q represents the quantity of Honda Accords they will sell and P represents the price they charge in US dollars.
We can re-write that demand curve as:
P = 40,000 - 2.5 Q.
Take every possibly quantity that the managers might choose between
and 7,000 in units of 100. For each possible quantity,
calculate the associated price the managers would need to charge, the revenue they would earn, and the total costs. You can then
calculate profits for each level of quantity. Highlight the cell that contains the highest value of profit.
Finally, you can also approximate marginal revenue here as the change in total revenue after the next 100 cars are produced. At what
quantity does marginal revenue roughly equal marginal cost?…
Chapter 5 Solutions
Macroeconomics
Ch. 5.1 - Prob. 1STCh. 5.1 - Prob. 2STCh. 5.2 - Prob. 1STCh. 5.2 - Prob. 2STCh. 5.3 - Prob. 1STCh. 5.3 - Prob. 2STCh. 5.4 - Prob. 1STCh. 5.4 - Prob. 2STCh. 5.5 - Prob. 1STCh. 5.5 - Prob. 2ST
Ch. 5.6 - Prob. 1STCh. 5.6 - Prob. 2STCh. 5.7 - Prob. 1STCh. 5.7 - Prob. 2STCh. 5.8 - Prob. 1STCh. 5.8 - Prob. 2STCh. 5.9 - Prob. 1STCh. 5.9 - Prob. 2STCh. 5.10 - Prob. 1STCh. 5.10 - Prob. 2STCh. 5.11 - Prob. 1STCh. 5.11 - Prob. 2STCh. 5.12 - Prob. 1STCh. 5.12 - Prob. 2STCh. 5 - Prob. 1QPCh. 5 - Prob. 2QPCh. 5 - Prob. 3QPCh. 5 - Prob. 4QPCh. 5 - Prob. 5QPCh. 5 - Prob. 6QPCh. 5 - Prob. 7QPCh. 5 - Prob. 8QPCh. 5 - Prob. 9QPCh. 5 - Prob. 10QPCh. 5 - Prob. 11QPCh. 5 - Prob. 12QPCh. 5 - Prob. 13QPCh. 5 - Samantha is flying from San Diego, California to...Ch. 5 - Prob. 15QPCh. 5 - Prob. 16QPCh. 5 - Prob. 1WNGCh. 5 - Prob. 2WNGCh. 5 - Prob. 3WNGCh. 5 - Prob. 4WNGCh. 5 - Prob. 5WNGCh. 5 - Prob. 6WNG
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- Suppose that managers at Honda are deciding how to price the new Honda Accord. The managers estimate that their total costs increase by $20,000 for each car they produce. They also estimate the demand curve they face; it is described by the equation: Q = -0.4 P + 16,000, where Q represents the quantity of Honda Accords they will sell and P represents the price they charge in US dollars. We can re-write that demand curve as: P = 40,000 - 2.5 Q. Take every possibly quantity that the managers might choose between 0 and 7,000 in units of 100. For each possible quantity, calculate the associated price the managers would need to charge, the revenue they would earn, and the total costs. You can then calculate profits for each level of quantity. Highlight the cell that contains the highest value of profit.arrow_forwardQ1. Suppose the government is considering an increase in the toll on a certain stretch of highway from $3 to $4. At present, 1 million cars per week use that highway stretch; after the toll is imposed, the number of cars per week will change according to its price elasticity of demand of -0.8 (this elasticity value is estimated based on the initial-value method). If the marginal cost of highway use is constant (i.e., the supply curve is horizontal) and equal to $3 per car, what is the net annual cost to society attributable to the increase in the toll? (your answer must be rounded off to the nearest million dollars per year, i.e., no decimal places; there are 52 weeks in a year)arrow_forwardIn the Current Events article, it mentioned how DoorDash is trying to increase its amount of subscription users (DashPass). The price for DashPass is $10 per month. Assume the demand for regular DoorDash deliveries (non-subscription) is: P = 20 - 0.04Q where P is the delivery fee on the order. Assume the goal of the company is to maximize combined revenue from both regular deliveries (delivery fees) and the subscription fees (DashPass). A different manager suggest pricing the deliveries at $14 per delivery. Which of the following actions would you select as a manager? Group of answer choices Advise that it should be a $10 fee per delivery Advise that the$14 delivery fee is too low Advise that it should be a $20 fee per delivery Agree that $14 per delivery is optimal in this situationarrow_forward
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