A City Wants to Raise Revenues to Build a New

question 135

Multiple Choice

A city wants to raise revenues to build a new municipal swimming pool next year.The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues.The city manager suggests that the city lower the price of admission to raise revenues.Who is correct?

• A)Both the mayor and city manager would be correct if demand were price elastic.
• B)Both the mayor and city manager would be correct if demand were price inelastic.
• C)The mayor would be correct if demand were price elastic;the city manager would be correct if demand were price inelastic.
• D)The mayor would be correct if demand were price inelastic;the city manager would be correct if demand were price elastic.

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Definitions:

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase and may decrease.

Labor Input

The amount of work contributed by employees, measured in hours or effort, used in the production of goods and services.

Ceteris Paribus

A Latin phrase meaning "all other things being equal," used in economics to isolate the relationship between two variables by holding other relevant factors constant.

Price of Capital

Refers to the cost of using capital goods, such as machinery or buildings, in the production of goods and services, often influenced by interest rates and market demand.