A study of mass transit systems in American cities revealed that long-run revenues generally decline after substantial fare increases.This suggests that:
A) the demand for mass transit is price-elastic in the long run.
B) the demand for mass transit is price-inelastic in the long run.
C) mass transit service deteriorates in the long run as price rises.
D) there are few good substitutes for such systems in urban areas.

Question

Quizplus · Accepted Answer

The fact that long-run revenues decline after substantial fare increases suggests that the demand for mass transit is price-elastic in the long run, meaning that a change in price causes a significant change in demand. Otherwise, if the demand were price-inelastic (B), revenues would not decline significantly after fare increases. Additionally, there is no evidence to suggest that mass transit service deteriorates as price rises (C) or that there are few good substitutes for such systems in urban areas (D).

A Study of Mass Transit Systems in American Cities Revealed