<p>One key factor that the question doesn't acknowledge is whether or not all of the 100 citizens of Johnson ride the bus. If the bus fair goes from $1 to $1.50 per ride, then those Johnsonites who drive their own car will be happy to see the price increase since they don't have to pay that extra money all while still sharing in the company's profits. We also don't know how the profits are distributed. All of these questions tend to make me think that the answer is FALSE.</p>

<p>The good news for the people of Johnson is that having a competing bus service come in is far more likely than having a competitor for their energy company given the low barriers of entry.</p>

CC BY-SA 3.0
2015-12-13T06:32:13.757Z
2015-12-13T06:32:13.757Z
Charlie
<p>Have a question:</p>

<p>In the town of Johnson, there are 100 identical citizens and one bus company. The bus company is owned by the citizens, each of whom receives 1% of the bus company’s profits. Nobody from outside of Johnson ever uses these buses. True or False: The citizens of Johnson won’t mind if the bus company charges monopoly prices, because the profits all come right back to them anyway.</p>

<p>No clue where to start. Anyone can tell me the answer?</p>

CC BY-SA 3.0
2015-12-12T22:35:26.733Z
Please see our [policy on homework questions](http://meta.economics.stackexchange.com/q/1465/42)
Herr K.
CC BY-SA 3.0
2015-12-13T05:13:26.897Z
The question doesn't say all cititzens use the bus equally. Consider what happens if some citizens use the bus more than others. What about the extreme case where only one person uses the bus and the rest don't? That one citizen would be paying extra and only getting a fraction back, so...
Kitsune Cavalry
<microeconomics><monopoly><profits>
Monopoly Profits
soumi
# Monopoly Profits

(Asked by: username_0 on 2015-12-12)

Have a question:

In the town of Johnson, there are 100 identical citizens and one bus company. The bus company is owned by the citizens, each of whom receives 1% of the bus company’s profits. Nobody from outside of Johnson ever uses these buses. True or False: The citizens of Johnson won’t mind if the bus company charges monopoly prices, because the profits all come right back to them anyway.

No clue where to start. Anyone can tell me the answer?

**Tags:** microeconomics, monopoly, profits

> **Comments:**
> **username_1**: Please see our [policy on homework questions](http://meta.economics.stackexchange.com/q/1465/42)  
> **username_2**: The question doesn't say all cititzens use the bus equally. Consider what happens if some citizens use the bus more than others. What about the extreme case where only one person uses the bus and the rest don't? That one citizen would be paying extra and only getting a fraction back, so...  

---

## 1 answers

### Answer by username_3 on 2015-12-13. Score: 0 | Accepted answer

One key factor that the question doesn't acknowledge is whether or not all of the 100 citizens of Johnson ride the bus. If the bus fair goes from $1 to $1.50 per ride, then those Johnsonites who drive their own car will be happy to see the price increase since they don't have to pay that extra money all while still sharing in the company's profits. We also don't know how the profits are distributed. All of these questions tend to make me think that the answer is FALSE.

The good news for the people of Johnson is that having a competing bus service come in is far more likely than having a competitor for their energy company given the low barriers of entry.


---

