Q. University of Richmond Professor Erik Craft analyzed the states' pricing of vanity plates. He found that in California, where vanity plates cost $28.75, the elasticity of demand was 0.52. In Massachusetts where vanity plates cost $50 elasticity of demand were 3.52.
Assuming vanity plates have zero production cost and his estimates are correct, was each state collecting the maximum revenue it could from vanity plates? Elucidate your reasoning. What recommendation would you've for every state to maximize revenue? Presumptuous the demand curves were linear or graphically demonstrate your reasoning.