1. What is the equilibrium price of train trips?
2. How many train trips are provided and purchased?
3. Calculate the producer surplus for the train trips providers.
Assume the government puts $50/trip tax on producers. Answer the following questions:
4. What is new equilibrium price of train trips to consumers?
5. What is the new equilibrium price of train trips to producers?
6. How many train trips are produced and sold?
7. How much tax revenue is raised?
8.The government decided not to apply the tax, but a bus company who can dominate the market starts to provide bus trips. Its supply curve (called marginal cost curve) for bus trips is:
S2 = 500 + 40T1
9. How many bus trips will now be produced?
10. How many bus trips will now be provided by the bus companies operating before the extra bus company entered the market?
Train and bus trips between two towns are provided by