Figure 5-15

Hal initially consumes the combination marked as A in Figure 5-15. After his income increases, Hal consumes combination B. We can conclude that Hal views

Wealthy people are more likely than poor people to use airplanes rather than busses for interurban travel because

A) their demand for transportation is more elastic. B) their demand for transportation is more inelastic. C) they can better afford to use a higher-cost mode of transportation. D) they are more likely to ignore the relative costs of busses and airplanes. E) traveling by airplane usually costs them less than traveling by bus.

Compared to the profit-maximizing outcome, average cost pricing in natural monopoly leads to

a. all of the following b. a higher price c. decreased consumer surplus d. the elimination of economic profit e. less output