Question

If you’re like most college students, you are always worried about having enough money. Suppose that you decide to become an Uber driver and offer rides to students on weekends. For a fee, you will drive them to parties and pick them up at the end of the night. The table below depicts the demand schedule for rides. To keep things simple, assume that you are the only person providing this service; that is, you’re a monopolist. Let’s see how much money you can make.
 

Price	Quantity of Rides Demanded
$70	0
$60	10
$50	20
$40	30
$30	40
$20	50
$10	60

Part 1   (3.8 points)

First, complete the table below.
 

Price	Quantity of Rides Demanded	Total Revenue	Marginal Revenue (per 10 customers)
$70	0	$0	---
$60	10	$600	$600
$50	20	$	$
$40	30	$	$
$30	40	$1,200	$0
$20	50	$	$
$10	60	$600	-$400

Part 2   (0.6 point)

Although you have no fixed costs, you do incur a marginal cost of $15 per ride. How much do you charge per ride to maximize profits?
   $   

Part 3   (0.6 point)

How much profit do you earn?   $   
 

Answer 1

Ans:

1) Table showing marginal revenue and marginal cost.

Price	Quantity of rides demanded	Total revenue	Marginal Revenue	Marginal cost
$70	0	$0	$0	0
$60	10	$600	$600	$150
$50	20	$1000	$400	$150
$40	30	$1200	$200	$150
$30	40	$1200	$0	$150
$20	50	$1000	-$200	$150
$10	60	$600	-$400	$150

2) price charged per ride to maximize its profits is $40.

Monopolist will maximize its profits by producing the level of output where marginal revenue is equal with its marginal cost.In ths case price charged per ride to maximize its profits is $40.

3) Profit = Total revenue - Total cost

= ($40 * 30) - ($15 * 30)

= $1200 - $450

= $750