In: Economics
Work & Rest is an all inclusive hotel operating as a monopoly in a mid-sized community. The manager estimates that the hotel's total costs are described by the equation C = 0.1Q2 + 20Q + 5000, where Q is the number or persons serviced and P is the price paid per person. Although it is located in a mid-sized community, it is close to a major highway that runs along the east coast. Often times, travelers would use the services of Work & Rest as a stop in their commute between two major citys. As such, the market demand for its service is described by the equation P = 170 - 0.2Q.
1. Given the current market conditions, Work & Rest's profit-maximizing quantity is and the price charged per person is ( 4 points)
Consider that after a series of reports from special interest groups, the local government decides to regulate Work & Rest by using the optimal pricing policy.
2. Given the successful implementation of the government's policy, Work & Rest's profit-maximizing quantity is (2 points)
3. Given the successful implementation of the government's policy, what is Work & Rest's profit at its profit maximizing quantity? (4 points)I
4. If the policy remains in place, and there are no further external shocks to the market, is it likely that West & Rest will continue to operate and provide service? (In the space provided enter will or will not)
In the long run, West & Rest continue to provide service in this mid-sized community