A Local Transit Authority Charges $1 for a Bus Ride

question 450

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) raise the fare.
• B) lower the fare.
• C) leave the fare as it is.

Distinguish between the marginal cost and the marginal benefit of R&D spending.

Explain the significance of the interest-rate cost-of-funds curve being perfectly elastic.

Understand the role of diminishing marginal returns in shaping the expected-rate-of-return curve for R&D investments.

Recognize different sources of funds for R&D and their implications for R&D decision making.

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Definitions:

Derived Demand

Derived demand occurs for a factor of production when the demand for another good or service drives it, such as the demand for raw materials increasing due to higher demand for the final product.

Factor of Production

An economic resource used in the production of goods and services, including labor, capital, land, and entrepreneurship.

Market

A group of buyers and sellers of a particular good or service.

Diminishing

A principle often referring to diminishing returns, where additional inputs result in progressively smaller increases in output.