Suppose there is another terrorist anthrax scare. The U.S. Post Office finds that it now has extra costs associated with de-contaminating all first class mail for anthrax. It is considering a rate hike, but it will only be successful in raising more revenue to pay for these additional costs if
A) there are many substitutes for first class mail service
B) no anthrax is found on the mail
C) the demand for first class mail services is inelastic
D) the rate increase is a very large one

Question

Quizplus · Accepted Answer

If the demand for first class mail services is inelastic, it means that consumers' demand for these services does not significantly decrease with an increase in price. Therefore, the U.S. Post Office would be successful in raising more revenue through a rate hike, as consumers would continue to use the service despite the higher costs.

Suppose There Is Another Terrorist Anthrax Scare