Q1. The total operating revenue of a public transportation authority is $100 million while its total operating cost is $120 million. The price of a ride is $1, and the price elasticity of demand for public transportation has been estimated to be -.04. By law, the public transportation authority must take steps to eliminate its operating deficit is asking should the transportation authority increase or decrease the price per ride based upon the price elasticity of demand.
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Q2. Suppose that John’s MPC is constant at 3/4. If his breakeven point occurs at $7,000 how much will John have to borrow when his income is $3,000?
