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Problem 39

If the transit system were regulated to provide the most allocatively efficient quantity of output, what
output would it supply and what price would it charge? What subsidy would be necessary to insure this efficient provision of transit services?

Answer

Thus, the profit is maximum for urban transit system when price of $\$ 4$ is charged to 7 million
riders with subsidy of $\$ 0.6$ per customer.


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