Travelers driving through Gotham City can use a freeway or the Cross Town Tollway to get through the city. The tollway charges $1.00 per car during the morning rush hour (6-9 AM) and the afternoon rush hour (4-7 PM), and the toll is $0.40 per car at all other times. The weekly demand for using the tollway during rush hour is where quantity demanded is measured in thousands of cars, and the weekly demand for the non-rush hour period is Gotham City's marginal cost of operating the tollway is per car.
a. What are the marginal revenue curves associated with the two demand curves?
b. Has the city set the profit maximizing tolls for the Cross Town Tollway? If not, do the current tolls generate too much or too little traffic on the tollway?

Question

Travelers driving through Gotham City can use a freeway or the Cross Town Tollway to get through the city. The tollway charges $1.00 per car during the morning rush hour (6-9 AM) and the afternoon rush hour (4-7 PM), and the toll is $0.40 per car at all other times. The weekly demand for using the tollway during rush hour is  where quantity demanded is measured in thousands of cars, and the weekly demand for the non-rush hour period is  Gotham City's marginal cost of operating the tollway is  per car.
a. What are the marginal revenue curves associated with the two demand curves?
b. Has the city set the profit maximizing tolls for the Cross Town Tollway? If not, do the current tolls generate too much or too little traffic on the tollway?

Quizplus · Accepted Answer

The Answer of Travelers driving through Gotham City can use a freeway or the Cross Town Tollway to get through the city. The tollway charges $1.00 per car during the morning rush hour (6-9 AM) and the afternoon rush hour (4-7 PM), and the toll is $0.40 per car at all other times. The weekly demand for using the tollway during rush hour is  where quantity demanded is measured in thousands of cars, and the weekly demand for the non-rush hour period is  Gotham City's marginal cost of operating the tollway is  per car.
a. What are the marginal revenue curves associated with the two demand curves?
b. Has the city set the profit maximizing tolls for the Cross Town Tollway? If not, do the current tolls generate too much or too little traffic on the tollway?

Travelers Driving Through Gotham City Can Use a Freeway or the Cross