Essay
The Bulverde Railroad runs a freight train daily between Brownsville and Bulverde. Two major customers use this service: Texas Spice Distributors and Bulverde Gypsum Company. The demand for freight cars is given by the following equations:
Ps = 500 - 8Qs for Texas Spice Distributors, and
Pg = 400 - 5Qg for Bulverde Gypsum Company.
P is the price charged by Bulverde Railroad for hauling one freight car of materials between Brownsville and Bulverde, and Q is the number of cars demanded by each user. Bulverde Railroad's total cost function is given by the following equation:
TC = 10,000 + 20Q
where Q is the total number of freight cars hauled on a particular trip. If Bulverde Railroad price discriminates:
a. What will be the quantity demanded by each customer?
b. What will be the prices charged each customer?
c. What will be the railroad's total profit?
Correct Answer:
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a. Profit will be maximized where MC = m...View Answer
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