Travelers Driving Through Gotham City Can Use a Freeway or the Cross

question 76

Essay

Travelers driving through Gotham City can use a freeway or the Cross Town Tollway to get through the city. The tollway charges $1.00 per car during the morning rush hour (6-9 AM) and the afternoon rush hour (4-7 PM), and the toll is $0.40 per car at all other times. The weekly demand for using the tollway during rush hour is where quantity demanded is measured in thousands of cars, and the weekly demand for the non-rush hour period is Gotham City's marginal cost of operating the tollway is per car.
a. What are the marginal revenue curves associated with the two demand curves?
b. Has the city set the profit maximizing tolls for the Cross Town Tollway? If not, do the current tolls generate too much or too little traffic on the tollway?

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Definitions:

Ego

In psychoanalytic theory, the part of the personality that mediates between external reality and inner demands of the id and superego.

Correlation Coefficient

A number ranging from -1.00 to +1.00 that expresses the direction (positive or negative) and strength of the relationship between two variables.

Covariance Coefficient

A statistical measure that indicates the extent to which two variables change together; it can be positive, negative, or zero.

Maximum-Likelihood Coefficient

A statistical measure that estimates the parameters of a model to maximize the likelihood of fitting the model to a given set of data.