If Tolls on a Toll Road Can Be Raised Significantly

question 147

Multiple Choice

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, demand for using the toll road must be

• A)inelastic.
• B)elastic.
• C)unit elastic.
• D)perfectly elastic.

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Definitions:

Gross Profit Method

An inventory estimation technique that calculates cost of goods sold and ending inventory based on the gross profit margin.

Capital Budgeting

The process of planning and evaluating investments in long-term assets.

Payback Method

A capital budgeting technique that calculates the time needed to recoup the investment cost through net cash flows.

Cost of Capital

The minimum profit rate a company needs to achieve on its investment ventures to keep its market value stable and draw in capital.