If in the short run the demand for mass transit is inelastic and in the long run the demand is elastic, then a price
A) increase will decrease total revenue in the short run but increase total revenue in the long run.
B) increase will increase total revenue in the short run but decrease total revenue in the long run.
C) decrease will increase total revenue in the short run but decrease total revenue in the long run.
D) decrease will decrease total revenue in the short run and decrease total revenue in the long run.

Question

Quizplus · Accepted Answer

In the short run, when demand is inelastic, a price increase will lead to an increase in total revenue as the demand for mass transit is relatively unaffected by price changes. However, in the long run, when the demand becomes more elastic, a price increase will lead to a decrease in total revenue as consumers will have more time to adjust their behavior, either by finding alternative modes of transportation or by deciding to forgo using mass transit altogether. Therefore, choice B is the best answer.

If in the Short Run the Demand for Mass Transit