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PROBLEM SET 3: Due Date: Maximum length: COMPETITION AND GAME THEORY Thursday, October 15, at noon. Place in boxes behind workstation 3425D. SIX...

This question was created from MGT 404 - Fall 2015 - Problem set 3


I dont understand question 1. Can you please guide me through the answers?


PROBLEM SET 3: COMPETITION AND GABIE THEORY Due Date: Thursday, October 15, at noon. Place in boxes behind workstation 3425D.
Maximum length: SIX double-spaced typewritten pages 1. Social casts ofmauapofit: TwinCity is the monopoly provider of a hop-on-hop—off tour bus
service in New York. The marginal cost of serving a customer is $6. The inverse demand for the
bus service is: P=1 l-Q
where P is the price in $ and Q is the number of tickets sold in ‘OOOS. a) Given that TwinCity is a monopolist, can you predict the price and quantity of tickets
sold? Calculate its profit and the consumer surplus. What is the deadweight loss? b) NYC fl: Co, the official marketing and tourism organization of New York proposes that
government set a maximum price of $7 per ticket, to enable widespread access. Calculate
quantity, change in consumer surplus and TwinCity’s pro fits at this maximum price. c) Prof. Levinsohn suggests that consumers need even more relief from greedy monopolist.
He proposes a maximum price of $5.50. What do you think Prof. Levinsohn is trying to
do? What result would his proposal have upon TwinCity?

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