University of Richmond Prof. Erik Craft analyzes the state's pricing of vanity plates. He found that in California, where vanity plates cost $28.75, the elasticity of demand was .52. In massacdusettes, where Vanity plates cost $50, the elasticity of demand was 3.52
a. Assumming vanity plates have zero production cost and his estimates are correct, was each state collecting the maximum revenue it could from vanity plates?
b. What recommendation would you have for each state to maximize revenue?
c. If these estimates are correct, which state was most likely to be following a politically unsupportable policy?
d. assuming the demand curves were linear, graphically demonstrate you reasoning in "a" and "b"