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Question: In an April 2002 article in Contemporary Economic Policy, Erik Craft analyzes state's pricing of vanity plates.

For California, he finds that the price elasticity is .53 and the price they charge for vanity plates is $28.75, which indicates that California is:

a. maximizing revenue since elasticity is less than one and revenue will increase following a price increase when demand is inelastic.

b. not maximizing revenue since elasticity is less than one and revenue will increase following a price increase when demand is inelastic.

c. maximizing revenue since elasticity is less than one and revenue will decrease following a price increase when demand is inelastic.

d. not maximizing revenue since elasticity is less than one and revenue will decrease following a price increase when demand is inelastic.

In an April 2002 article in Contemporary Economic Policy, Erik Craft analyzes state's pricing of vanity plates.

For Massachusetts, he finds that the price elasticity is 3.52 and the price they charge for vanity plates is $50, which indicates that Massachusetts is:

a. maximizing revenue since elasticity is greater than one and revenue will increase following a price decrease when demand is elastic.

b. not maximizing revenue since elasticity is greater than one and revenue will increase following a price decrease when demand is elastic.

c. maximizing revenue since elasticity is greater than one and revenue will decrease following a price decrease when demand is elastic.

d. not maximizing revenue since elasticity is greater than one and revenue will decrease following a price decrease when demand is elastic.

Explain your reasoning for choosing the answer you chose for California and Massachusetts. Do you think "culture" may play a role if there is a difference between the two states in their choice of vanity license plates?

Please use the following rubric as a guide

Met the criteria for the correct responses to the questions assigned.

Used vocabulary relevant to the current week's topics-at least five terms.

Participated in the discussion by asking a question, providing a statement of clarification, providing a point of view with rationale, challenging a point of discussion, or making a relationship between one or more points of the discussion.

Justified ideas and responses by using appropriate examples and references from texts, Web sites, and other references or personal experience.

Presented a structured report free of spelling and grammatical errors and cited sources in APA format when necessary.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92569685

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