1. Your consultant service, Brainiac Consulting, has been hired by new Mayor Michael Fougere of the City of Regina to examine the City of Regina Transit (bus) service’s pricing system for monthly bus passes. Mayor Fougere wants to know if the current pricing scheme employed by the Transit system for monthly passes is in the public interest. If not, he wants recommendations on what price to charge for the monthly passes. The Mayor had the Manager of City of Regina Transit, Louis P. Zerr, send the following transit data to you.
The City of Regina Transit is a monopoly bus service that has two different types of riders:
1. Senior citizens – these are people that are aged 65 or greater. On average, 1,000 senior citizens purchased monthly passes each month.
2. Non-senior citizens – these are people less than the age of 65. On average, 3,600 non-senior citizens purchased monthly passes each month.
Zerr also indicates that City of Regina Transit’s marginal cost is constant at $10 per passenger with a monthly pass and the City of Regina Transit has no fixed costs.
Despite the fact that he thought seniors were less willing to pay for monthly passes, Zerr priced monthly passes at $20 per pass for both seniors and non-seniors because he felt that it was too much bother to price them differently. He justified this policy by arguing that the City of Regina Transit made a profit from the monthly bus passes given the marginal costs noted above.
a) Given the above information, confirm or deny Zerr’s claim that the monthly bus passes are profitable for the City of Regina Transit system by calculating the total revenue, total cost and profit (or loss).
1. Your consultant service, Brainiac Consulting, has been hired by new Mayor Michael Fougere of the City of Regina to examine the City of Regina Transit (bus) service’s pricing system for monthly bus passes. Mayor Fougere wants to know if the current pricing scheme employed by the Transit system for monthly passes is in the public interest. If not, he wants recommendations on what price to charge for the monthly passes. The Mayor had the Manager of City of Regina Transit, Louis P. Zerr, send the following transit data to you.
The City of Regina Transit is a monopoly bus service that has two different types of riders:
1. Senior citizens – these are people that are aged 65 or greater. On average, 1,000 senior citizens purchased monthly passes each month.
2. Non-senior citizens – these are people less than the age of 65. On average, 3,600 non-senior citizens purchased monthly passes each month.
Zerr also indicates that City of Regina Transit’s marginal cost is constant at $10 per passenger with a monthly pass and the City of Regina Transit has no fixed costs.
Despite the fact that he thought seniors were less willing to pay for monthly passes, Zerr priced monthly passes at $20 per pass for both seniors and non-seniors because he felt that it was too much bother to price them differently. He justified this policy by arguing that the City of Regina Transit made a profit from the monthly bus passes given the marginal costs noted above.
a) Given the above information, confirm or deny Zerr’s claim that the monthly bus passes are profitable for the City of Regina Transit system by calculating the total revenue, total cost and profit (or loss).
