Total operating revenue of the public transportation


Question:

The total operating revenue of a public transportation authority are $100 million while its total operating costs are $120 million. The price of a ride is $1, and the price elasticity of demand for public transportation has estimated to be -0.4. By law, the public transportation authority must take steps to eliminate its operating deficit. (a) What pricing policy should the transportation authority adopt? Why? (b) What price per ride must the public transportation authority charge to eliminate the deficit if it cannot reduce costs?

Solution Preview :

Prepared by a verified Expert
Microeconomics: Total operating revenue of the public transportation
Reference No:- TGS02090046

Now Priced at $20 (50% Discount)

Recommended (94%)

Rated (4.6/5)