(solution) Suppose that there are two firms competing in the market for taxi

Suppose that there are two firms competing in the market for taxi services. Big Ben Taxis has the marginal cost MCB = $9 per trip, and the fixed cost FCB = $3,000,000. While Whitehall Taxis has the marginal cost MCW = $15 per trip, and the fixed cost FCW =$1,000,000. Inverse demand for taxi trips in the market is given by the function, P=75? Q/10,000 In this equation, P is the price of a taxi trip, and Q is the total quantity of taxi trips supplied by the two taxi companies. Question 1: Find the equilibrium price and quantities for the case in which the two taxi companies engage in Cournot (quantity) competition. What profits will Big Ben Taxis and Whitehall Taxis earn. (11 Marks) Question 2: Using your answers to question 1, determine which firm has the greater market power. (4 Marks) Question 3: Now suppose that a firm can only supply taxi services if it purchases a licence from the government. What is the highest fee that the government can charge for a license, if the government wants both Big Ben Taxis and Whitehall Taxis to purchase a license? (Note: A licence does not place a limit on the number of taxi trips a company can supply. You should assume that both firms are charged the same fee.) (2 Marks) Question 4: If, instead, the government wants to maximise the revenue it receives from taxi license fees, how many licenses should it sell, and what fee should it charge? (8 Marks)
Running Heading: BIG BEN TAXIS 1 Big Ben Taxis

 

Student?s Name

 

Institution affiliated

 

Professors Name

 

Date BIG BEN TAXIS

 

. Big Ben Taxis Find the equilibrium price and quantities for the case in...

 

---

Solution details:

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

Sep 13, 2020

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP/h4>

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

• As a reference for in-depth understanding of the subject.
• As a source of ideas / reasoning for your own research (if properly referenced)
• For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).

This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

NEW ASSIGNMENT HELP?

Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN A DEADLINE.