A Public Transit Company Finds That When It Reduces the Price

question 264

Multiple Choice

A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

• A) the demand curve is horizontal, reflecting infinite price elasticity.
• B) the company sells the same number of bus tickets both before and after the price change.
• C) the demand curve for bus tickets must have shifted to the right.
• D) the firm is operating in a range of the demand curve that is unit elastic.
• E) the price should be lowered further so that a larger quantity can be sold.

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Definitions:

Quick Ratio

A liquidity metric that indicates a company's capacity to pay its current liabilities without needing to sell inventory, calculated as (cash + marketable securities + accounts receivable) / current liabilities.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year or within the business's operating cycle.

Current Liabilities

Obligations or debts that a company must pay within a year.

Inventory

The goods and materials a business holds for the ultimate goal of resale or repair.