Question
In: Economics
The City of Atlantis provides transit services for residents throughout the city. Suppose you are assigned...
- The City of Atlantis provides transit services for residents throughout the city. Suppose you are assigned to determine transit ticket prices for the government of the City of Atlantis. How do you decide on the optimal ticket prices so that the city can provide an efficient level of transit services? Explain.
Solutions
Expert Solution
Solution:
The optimal ticket price can be found where the market forces of demand and supply equate (or the market demand curve intersects market supply curve in the market of transit services). In this sense, the quantity of transit services that is demanded by the consumers at a particular price, is being exactly provided for or supplied for at that price.
This is efficient because due to this equivalence in quantities demanded and supplied for a common price, there is no deadweight loss produced.
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