Suppose That VIA Rail Asked Government Authorities for Permission to Increase

question 19

Multiple Choice

Suppose that VIA Rail asked government authorities for permission to increase its commuter rates by 20 percent.The railroad argues that declining revenues make this rate increase essential.Opponents of the rate increase contend that the railroad's revenues would fall because of the rate hike.It can be concluded that:

• A)both groups feel that the demand is elastic but for different reasons
• B)both groups feel that the demand is inelastic but for different reasons
• C)both groups feel that demand is unit-elastic, but for different reasons
• D)the railroad feels that the demand for passenger service is elastic and opponents of the rate increase feel it is inelastic
• E)the railroad feels that the demand for passenger service is inelastic and opponents of the rate feel it is elastic

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Definitions:

Unrealized Loss

A loss that results from holding onto an asset that has decreased in price, but has not actually been sold for a loss.

Available-For-Sale Securities

Financial assets that are intended to be sold in the short term, not held to maturity, and are recorded at fair market value.

Market Values

The present rate at which a service or asset is available for purchase or sale on the market.

Adjusting Entry

An accounting entry made in the journals at the end of an accounting period to allocate revenue and expenses to the period in which they actually occurred.