Question

If the transit system were regulated to operate with

no subsidy (i.e., at zero economic profit), what

the approximate output would it supply and what

approximate price would it charge?

Short answer

The price and quantity offered will not be as high or as cheap as they are now.

Step-by-step solution

Step 1. Introduction

Zero economic profit: The term "zero economic profit" refers to a scenario in which marginal income and marginal expense are equal.

Subsidy: Subsidy is the term for the government's financial aid.

Step 2. Explanation

All utility services, such as road, rail, power, and transportation, are normally regulated by the government. If the transit system is controlled and permitted to operate at a loss, it indicates the government is not making any money and is only covering the operational costs. As a result, the price and amount offered will be average, not extreme.