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:

Heart Motion

The movement of the heart as it contracts and relaxes to pump blood throughout the body.

PVC

Polyvinyl chloride, a synthetic plastic polymer used in a wide variety of applications, from piping and clothing to furniture and signage.

ECG

Electrocardiogram, a medical test that records the electrical activity of the heart over a period of time using electrodes placed on the skin.

Wave

A wave is a disturbance that transfers energy through space and matter, often described by its amplitude, wavelength, frequency, and speed.