The Utilities Commission in a City Is Currently Examining Pay

question 124

Essay

The utilities commission in a city is currently examining pay telephone service in the city. The commission has been asked to evaluate a proposal by a city council member to place a $0.10 price ceiling on local pay phone service. The staff economist at the utilities commission estimates the demand and supply curves for pay telephone service as follows:
Q_D = 1600 - 2400P
Q_S = 200 + 3200P,
where P = price of a pay telephone call, and Q = number of pay telephone calls per month.
a. Determine the equilibrium price and quantity that will prevail without the price ceiling.
b. Analyze the quantity that will be available with the price ceiling (in the long-run).
c. The city council realizes that the telephone company could curtail pay phone service in response to the ceiling. To prevent this, the council plans to impose a requirement that the telephone company must maintain the current number of pay phones. In light of this additional restriction, what will be the likely impact of the price ceiling?

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Definitions:

Human Factors Psychologist

A professional who applies psychological principles to the design of products, processes, and systems to optimize human well-being and overall system performance.

Person-machine Interactions

The study and design of systems and environments where humans and machines cooperate or interact.

Optimum Work Environments

refers to ideal conditions in the workplace that maximize employee performance and well-being, integrating factors such as physical space, social atmosphere, and organizational culture.

Organizational Structures

The systems and hierarchies established within an organization to define roles, responsibilities, and the flow of information.