Taco Bell Firm Raises the Price of Its Tacos

question 291

Multiple Choice

Taco Bell firm raises the price of its tacos.The price elasticity of demand for Taco Bell tacos equals 5.0.What happens to the Taco Bell's total revenue?

• A) nothing
• B) It increases.
• C) It decreases.
• D) It becomes negative.
• E) It might change, but more information is needed to determine if it increases, decreases, or does not change.

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Definitions:

Pigovian Externality

A situation where a market activity imposes a positive or negative cost or benefit on a third-party that is not reflected in the market price.

Free-Rider Problem

A situation in a shared-resource system where individuals consume more than their fair share or pay less than their fair share of the cost.

Free-Rider Problem

A situation where individuals consume a public good without contributing to its cost, undermining the provision of that good.

Public Goods

are commodities or services that are provided without profit to all members of a society, either by the government or a private individual or organization.