Recently a Railroad Asked the State Commerce Commission for Permission

question 35

Multiple Choice

Recently a railroad asked the state commerce commission for permission to increase its commuter rates by 20 percent.The railroad argued that declining revenues made this rate increase essential.Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike.It can be concluded that:

• A)the railroad felt that the demand for passenger service was elastic and the opponents of the rate increase felt it was inelastic.
• B)the railroad felt that the demand for passenger service was inelastic and the opponents of the rate increase felt it was elastic.
• C)both groups felt that the demand was inelastic but for different reasons.
• D)both groups felt that the demand was elastic but for different reasons.
• E)both groups felt that the demand was inelastic for the same reason.

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Definitions:

Universal Life Insurance

Similar to whole life insurance; the cash value can be used to pay the insurance premium if the policyholder doesn’t pay it, but if the cash value is not enough to pay the insurance, the policy can lapse.

Premium Payment

The amount paid for an insurance policy, either as a lump sum or in installments.

Cash Value

The amount available in cash for an insurance policy or investment account, often accessible to the policyholder or investor.

Corporate Bonds

Debt securities issued by corporations to raise capital, with the expectation that they will pay back the principal along with interest.