solution

The Lone Star Transportation Company hauls coal and manufactured goods.

The demand curve for its services by the coal producers is PC = 495 – 5QC where PC is the price (in dollars) per ton-mile of coal hauled and QC is the number of ton-miles of coal hauled (in thousands). The demand curve for its services by the producers of manufactured goods is

PM = 750 – 10QM where PM is the price (in dollars) per ton-mile of manufactured goods hauled,

and QM is the number of ton-miles of manufactured goods hauled (in thousands).

The firm’s total cost function is TC = 410 + 8(QC + QM)

where TC is total cost (in thousands of dollars).

a. What price should managers charge to haul coal?

b. What price should managers charge to haul manufactured goods?

c. If a regulatory agency were to require managers to charge the same price

to haul both coal and manufactured goods, would this reduce the firm’s

profit? If so, by how much?