A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.2. To increase its revenue, the transit authority should
A) leave the fare as it is.
B) raise the fare.
C) lower the fare.
D) charge $1.20.
Answer: C
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"Mediocre economists often consider only the immediate direct effects of a change, whereas a good economist will also consider indirect effects that may only become observable over time." This statement most clearly emphasizes
A) the law of comparative advantage. B) economizing behavior. C) the importance of secondary effects. D) the gains derived from voluntary exchange.
Suppose that a new study finds that eating more fish will improve a person's health. As a result
A) the demand for fish will fall. B) the demand for fish will rise. C) the price of fish will fall. D) a smaller amount of fish will be purchased.
Firm A has been dealing in baby food products for the past 10 years and enjoys a good market share. Suppose a new firm enters the market to capitalize on the increasing demand for such products. However, the products of the new firm fail to attract customers. The failure of the new firm is due to
A. the learning curve effect. B. scale economies. C. the pioneering brand advantage of the incumbent. D. the specific assets owned by the incumbent.
What is the paradox of value and how is the paradox resolved?
What will be an ideal response?