e119 MG3-75uT@6/Regulating-Natural-Monopolies Table 11.06 Book b al O Back Ne Ur
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Question
e119 MG3-75uT@6/Regulating-Natural-Monopolies Table 11.06 Book b al O Back Ne Urban transit systems, especially those with rail systems, typically experience significant economies of scale in operation. Consider the transit system whose data is given in the Table Note that the quantity is in millions of riders Demand: Quantity Price 10 8 6 4 2 0 2 4 -6 Marginal Revenue Marginal Cost Average Cost Costs 9 75 67 58 5 47 46 46 49 54 Draw the demand, marginal revenue, marginal cost, and average cost curves Do hey have the normal shapes ? [show Solution) From the graph you drew to answer Exercise, would you say this transit system is a naltral monopoly? Justify 7:30 PM 8/3v201s UpExplanation / Answer
To find the most allocatively efficient quantity of output, we need to select the output where marginal cost is equal to marginal revenue. Thus, 5 units is the quantity where MC is equal to MR, efficient level of output is 5 units and corresponding efficient level of price would be $6.
Subsidy:
Transit subsidy helps poor wards. This has additionally been contended at the naturally visible level, e.g. Yonah Freemark legitimizes the government transit program by belligerence for spatial cross-endowments, i.e. profiting poor locales instead of needy individuals.
Transit lessens blockage on different modes, by taking cars off the street, and in this manner benefits drivers (who should hence pay for it).
Transit animates monetary advancement.
Cars are subsidized, thusly transit ought to be subsidized.
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