If you\'re like most college students, you are always worried about having enoug
ID: 1129643 • Letter: I
Question
If you're like most college students, you are always worried about having enough money Suppose that you decide to become an Uber driver and offer rides to students on weekends. For a fee, you will drive them to parties and pick them up at the end of the night. The table below depicts the demand schedule for rides. To keep things simple, assume that you are the only person providing this service; that is, you're a monopolist. Let's see how much money you can make. uantity of Rides Demanded Price 70 $60 $50 $40 $30 $20 $10 10 20 30 50 60 1st attempt Part 1 (6points) ? See Hint First, complete the table below Marginal Revenue (per 10 customers Quantity of Total Price es Demanded Revenue $70 $60 $50 $40 $30 $20 $10 $0 $600 0 10 20 30 40 50 60 $600 $1,200 $0 $600 $400 Part 2 (1 point) ? See Hint Although you have no fixed costs, you do incur a marginal cost of $15 per ride. How much do you charge per ride to maximize profits? Part 3 (1 point) O See Hint How much profit do you earn? S 15 OF 21 QUESTIONS 01/21> SUBMIT ANSWERExplanation / Answer
Ans.
Part 1) Total revenue = price * quantity of rides
Total revenue = 60*10 = 600
Total revenue = 50*20 = 1000
TR = 40*30 = 1200
TR = 30*40 = 1200
TR = 20*50 = 1000
TR = 10*60 = 600
Marginal revenue = ( subtract total revenue from its next value)
_
600 - 0 = 600
1000 - 600 = 400
1200- 1000 = 200
1200-1200 = 0
1000 - 1200 = -200
600 - 1000 = -400
Part2) Charge per ride to maximize profit will be = marginal cost *change in quantity demand
Charges per ride = 15* 10 = $150
Part3)
profit= total revenue - total cost
profits earned are where marginal revenue is 0. So according to table and solved in part 1 the firm maximize profits at where price = 30 , quantity = 40 , total revenue = 1200 and marginal revenue = 0
Profit = TR - TC
Profit = 1200- 15 (40) { because Q= 40}
Profit = 1200 - 600
Profit = $600