Problem 6: Presently, American Freight and Bullet Transport are the exclusive short-haul freight carriers between Atlanta...

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Problem 6: Presently, American Freight and Bullet Transport are the exclusive short-haul freight carriers between Atlanta and Charlotte. The market inverse demand is given below. P = 460-60 where P is price per ton and Q is total tons hauled per week. For simplicity, also assume that neither firm has fixed costs. From company records, you are given the following variable cost function for each firm: TVC=2.50 TVC==5Q= In the work that follows, you may round all your results to 2 decimal places to reduce the clutter in your answers. a. Suppose T-Bone Pickens is contemplating buying both companies and since American has lower operating costs, his first thought is to shut down Bullet Transport and supply the entire market as a single plant monopoly. If he does this, what price will T-Bone charge per ton of freight hauled and how much freight will he haul? What profits will he expect to earn? b. T-Bone has second thoughts about shutting down Bullet Transport. If he decides to go ahead with the purchase and keep Bullet Transport in operation, he will have to operate his new firm as a multiplant monopoly. If he decides to go ahead and buy the two firms, what price will T-Bone charge per ton of freight hauled and how much freight will he haul? What profits will he expect to earn? How much freight will be hauled by each operation? c. Summarize the results of your findings over the three possible outcomes. Based on the two possible outcomes provided in this problem, the Single-plant monopolist has a larger P, QA, and A and the Multi-plant Monopolist has a larger Q. QB, and B. Problem 6: Presently, American Freight and Bullet Transport are the exclusive short-haul freight carriers between Atlanta and Charlotte. The market inverse demand is given below. P = 460-60 where P is price per ton and Q is total tons hauled per week. For simplicity, also assume that neither firm has fixed costs. From company records, you are given the following variable cost function for each firm: TVC=2.50 TVC==5Q= In the work that follows, you may round all your results to 2 decimal places to reduce the clutter in your answers. a. Suppose T-Bone Pickens is contemplating buying both companies and since American has lower operating costs, his first thought is to shut down Bullet Transport and supply the entire market as a single plant monopoly. If he does this, what price will T-Bone charge per ton of freight hauled and how much freight will he haul? What profits will he expect to earn? b. T-Bone has second thoughts about shutting down Bullet Transport. If he decides to go ahead with the purchase and keep Bullet Transport in operation, he will have to operate his new firm as a multiplant monopoly. If he decides to go ahead and buy the two firms, what price will T-Bone charge per ton of freight hauled and how much freight will he haul? What profits will he expect to earn? How much freight will be hauled by each operation? c. Summarize the results of your findings over the three possible outcomes. Based on the two possible outcomes provided in this problem, the Single-plant monopolist has a larger P, QA, and A and the Multi-plant Monopolist has a larger Q. QB, and B.

Answer rating: 100% (QA)

a If TBone Pickens decides to shut down Bullet Transport and operate as a singleplant monopoly he will set the price and quantity to maximize his prof... View the full answer