A Local Transit Authority Has Just Applied to Its Regulatory

question 51

Multiple Choice

A local transit authority has just applied to its regulatory board for a fare increase on its rail-transit system,arguing that the increase is needed to cover rising costs.A citizen's committee is opposed to the proposed increase,arguing that the company could increase its revenue by decreasing fares.Which of the statements below is correct?

• A)The company thinks that the demand is inelastic,whereas the committee thinks it is elastic.
• B)The company thinks that the demand is elastic,whereas the committee thinks it is inelastic.
• C)Both the company and the committee think that elasticity is unity.
• D)It is possible that both the company and the committee are correct.

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Definitions:

Consolidation

The process of combining the financial statements of a parent company with those of its subsidiaries to present as if the group of companies was a single economic entity.