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I need help on some homework questions for an MBA-level Managerial Economics class.

The total operating revenues of a public transportation authority are $100M while its total operatiing costs are $120M. The price per ride is $1, and the price elasticity of demand for transportation ia -0.4. The transportation authority has to elimiate 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?

  • Managerial Economics - ,

    Take a shot, what do you think?
    Hint: your given price elasticity is inelastic. So, increasing price should increase revenue.

  • Managerial Economics - ,

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