2011HW2

# 2011HW2 - Economics 104B Problem Set#2(Due April 28 Spring...

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Economics 104B Problem Set #2 (Due April 28) Spring 2011 1. There are five firms each of which has cost function C ( q ) = 40 q - 24 q 2 + 4 q 3 . The inverse demand function for the industry’s output is p d ( Q ) = 19 - Q . Find the competitive equilibrium. 2. Assume that the taxi industry in New York city is competitive. Also assume that the marginal cost of a taxi ride is constant and equal to \$5 per trip and that each taxi is capable of making 20 trips a day. Let the demand function for taxi rides each day be D ( p ) = 1100 - 20 p . a. Find the daily competitive equilibrium price of a taxi ride. b. How many rides will the citizens of New York make each day? c. How many taxis will operate in New York? d. Suppose now that every taxi operating in New York is required to have a special license and the number of such licenses is equal to the number of taxis you calculated in part c. Suppose further that the demand for taxi rides has increased to D ( p ) = 1200 - p . Calculate the new competitive equilibrium price and the daily profit of each taxi.

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