Consider Airfares on Flights Between New York and Minneapolis

question 255

Multiple Choice

Consider airfares on flights between New York and Minneapolis.When the airfare is $250,the quantity demanded of tickets is 2,000 per week.When the airfare is $280,the quantity demanded of tickets is 1,700 per week.Using the midpoint method,

• A) the price elasticity of demand is about 1.43,and an increase in the airfare will cause airlines' total revenue to decrease.
• B) the price elasticity of demand is about 1.43,and an increase in the airfare will cause airlines' total revenue to increase.
• C) the price elasticity of demand is about 0.70,and an increase in the airfare will cause airlines' total revenue to decrease.
• D) the price elasticity of demand is about 0.70,and an increase in the airfare will cause airlines' total revenue to increase.

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Definitions:

Golden Parachute

A large financial compensation package guaranteed to a company executive in the event of a forced departure or takeover.

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An acquisition attempt by a company or individual that is strongly opposed by the target company's management and board of directors.

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A corporate strategy where a company sells a portion of the equity of a wholly owned subsidiary or division through an initial public offering.

Spin-off

A type of corporate restructuring where a company creates a new independent company by selling or distributing new shares of its existing business.