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6. Suppose the firm is a subway for which a two-part tariff isn't practical. If the firm is allowed to set a price that earns zero profit, and there are no other sources of revenue for the firm, the value consumers would place on one more ride would be $4, while the cost of providing one more ride would be $1.
In order to earn exactly zero profit, the firm must set price equal to Long Run Average Total Cost, LRATC. Demand and LRATC are equal at a quantity of 40 and a price of $4. At an output of 40 the firm's Marginal Cost is only $1, thus consumers value one more ride at $4 (from the D curve) but the cost to the firm of providing one more ride is only $1 (from the MC curve).
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