Question

True North Railways, the sole provider of passenger rail service to a remote community, has revenues and costs shown in the table below. Price ($ per (5) Marginal Revenue ($ per passenger) (6) Marginal Cost ($ per passenger) Profit Maximization Table for True North Railways (2) (1) Quantity (3) (passengers Total Revenue passenger) per day) ($) $420 0 $. 350 50 280 100 210 150 140 200 (4) Total Cost ($) $24 750 26 750 27 750 27 900 28 000 70 250 29 000 34 500 0 300 a. Fill in the table. b. Identify True North's profit-maximizing quantity of output rounded to the nearest 50 passengers, and the price it charges. At this quantity, what is True North's short-term profit or loss? C.

Answer 1

P	Q	TR(P×Q)	TC	MR($\Delta$TR/$\Delta$Q)	MC($\Delta$TC/$\Delta$Q)	profit (TR—TC)
420	0	0	24750	—	—	—24750
350	50	17500	26750	350	40	—9250
280	100	28000	27750	210	20	250
210	150	31500	27900	70	3	3600
140	200	28000	28000	—70	2	0
70	250	17500	29000	—210	20	—11500
0	300	0	34500	—350	110	—34500

• So , it is clear from the above table that the firm's profit maximizing output is Q=150 and corresponding price P = 210
• At this price the firm's profit is $ 3600