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A company is considering building a bridge across a river. The bridge would cost $2 million to build and nothing to maintain.

. A company is considering building a bridge
across a river. The bridge would cost $2 million
to build and nothing to maintain. The following
table shows the company’s anticipated demand
over the lifetime of the bridge:
. If the company were to build the bridge,
what would be its profit-maximizing price?
Would that be the efficient level of output?
Why or why not?
b. If the company is interested in maximiz-ing profit, should it build the bridge? What
would be its profit or loss?
c. If the government were to build the bridge,
what price should it charge?
d. Should the government build the bridge?
Explain.


Number of Crossings,
Price per Crossing in Thousands
$8 0
7 100
6 200
5 300
4 400
3 500
2 600
1 700
0 800

This question was asked on Jan 17, 2013.

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