A Local Transit Authority Charges $1 for a Bus Ride

question 210

Multiple Choice

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 1.1. 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 $1.10.

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Definitions:

Right Tailed Test

A statistical hypothesis test where the area of interest is in the right tail of the probability distribution.

Test-statistic

A test statistic is a calculated value from sample data that is used in statistical hypothesis testing to determine whether to reject the null hypothesis.

Degrees of Freedom

Degrees of freedom refer to the number of independent values or quantities which can be assigned to a statistical distribution or in the calculation of statistics, minus the number of independent constraints applied to the data set.

Margin of Error

A measure indicating the range within which the true value lies, with a given level of confidence.