Question

We estimate the cost to drive for Uber each day is $30 (amortize the fees associated with the initial background checks, insurance and registration required on the car, cleaning of the car, etc.) and the marginal cost per trip is $10.00 (i.e. labor, maintenance, etc.). If the relationship between quantity demanded and price and the cost schedule is provided as follows, how many rides should the first Uber driver supply: ??=??−? and ??=??+???? How many Uber rides should you produce to maximize profits? Submit an Excel spreadsheet solution.

Answer 1

The cost to drive Uber each day is $30.

The marginal cost of per trip is $10.

The demand curve for Uber drive is:

The total cost given is:

For, profit maximisation we have to set MR = MC, where Marginal Revenue = Marginal Cost.

To find out MR we have to fing Total Revenue (TR)

Now, differentiating TR to find out the MR equation

To find out the Marginal cost we have to differentiate the Total cost function

Now, the profit maximising equation

The profit function is

Now, for Q = 12.5, we have the profit of

The excel spreadsheet is down below, for the Q from 0 to 15 drives of Uber ride.

Quantity of uber rides	Profit
0	-30
2.5	63.75
4.5	129.75
6.5	187.75
8.5	237.75
10.5	279.75
12.5	313.75
14.5	339.75
16.5	357.75
18.5	367.75
20.5	369.75

Hence, we can see that for the quantity = 12.5 the profit earned is 313.75.