You have been hired by the city to determine whether or not an increase in the price of tickets for the mass transit system would raise system revenues. The debate has been heated and the city council seems to be divided. One side argues that in order
to increase revenues from the transit system, prices must be increased. The opposing side argues that a price increase at this time will lower revenues. What assumptions are each side making about the price elasticity of demand, and how might you determine the best course of action?
The side that is arguing that revenues will decline as a result of an increase in the price of mass transit tickets is assuming that the demand is elastic. Those that argue that an increase in price will result in greater revenues believe that the price elasticity of demand for mass transit systems is inelastic. You might advise an increase in the price of transportation fares in order to identify whether demand is elastic or inelastic.
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If Congress reduced the period of patent protection from 20 years to 10 years, what would likely happen to the amount of private research and development?
A. Shorter patent protection would make innovation less lucrative, so the amount of research and development would likely decline. B. Companies would simply stop their research and development. because the cost is not worth the return. C. Companies would spend more on research because the patent period is shorter. D. Companies would not likely change their research and development amounts because they need innovation to survive.
How will a decrease in price affect a firm's revenues?
A) It depends on the price elasticity of demand. B) Revenues will stay the same. C) Revenues will decrease. D) Revenues will increase.
In 2011, the U.S. federal government collected approximately what percentage of the taxes in the economy?
a. 10% b. 40% c. 50% d. 67%
The cost-benefit model used by economists is:
A. useful because most people follow it most of the time. B. unrealistic because it is too detailed and specific to apply to most situations. C. useful because everyone follows it all of the time. D. unrealistic because everyone can think of times when he or she violated the principle.