A Government Wants to Reduce Electricity Consumption by 10

question 135

Multiple Choice

A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -5. The government must ________ the price of electricity by ________.

• A) raise; 2.0%
• B) raise; 0.5%
• C) raise; 1.25%
• D) lower; 0.5%

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Definitions:

Net Profit Margin

A financial ratio that shows the percentage of profit a company makes for each dollar of sales, after all expenses are deducted.

Return on Equity

A measure of a corporation's profitability that calculates how much profit a company generates with the money shareholders have invested.

Price/Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, used to evaluate if a stock is over or undervalued.

Return on Equity

A measure of financial performance calculated by dividing net income by shareholder's equity, indicating how well a company uses investments to generate earnings growth.