The drop down options are - 1000 / 700 / 400 / 200 2. Understanding the role of

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The drop down options are - 1000 / 700 / 400 / 200

2. Understanding the role of fixed cost in the short run Aa Aa Consider an airline's decision about whether or not to cancel a particular flight that hasn't sold out. The following table provides data on the total cost of operating a 100-seat plane for various numbers of passengers. Number of Passengers Total Cost TC=FC+VC 40,000 60,000 65,000 68,000 70,000 71,000 72,500 73,500 74,000 74,300 74,500 10 20 30 50 60 70 90 100 Given the information presented in the previous table, the fixed cost to operate this flight is At each ticket price, a different number of consumers will be willing to purchase tickets for this flight. Use the following demand schedule to complete the questions that follow: Quantity Demanded (Tickets per flight) (Dollars per ticket) 1,000 400 200 100 Assume that the price of a flight is fixed for the duration of ticket sales. Complete the following table by computing total revenue, total cost, variable cost, and profit for each of the prices listed. (Hint: Be sure to enter a minus sign before the number if the numeric value of an entry is negative.) Price (Dollars per ticket) 1,000 Total Revenue Total Cost TC = FC + VC Variable Cost VC TR TC 400 200 Given this information, the profit-maximizing price is per ticket, and seats out of 100 wil be purchased In this case, which of the following statements are true about the market at this price-quantity combination? Check all that Total revenue is greater than variable cost. The airline is operating at too big a loss and should, therefore, cancel this flight. Profit is positive. Price is less than average total cost. If fixed cost increases to $59,500, does this change the production decision of the ailine in the short run? O Yes O No True or False: Operating a flight without full capacity should never happen in the short run, because it cannot be profitable O True O False

Explanation / Answer

Ans)

Fixed cost of 40000

Price Quantity TR=PQ TC=FC+VC VC Profit=TR-TC ATC=TC/Q 1000 0 0 40000 40000 -40000 700 30 21000 65000 25000 -44000 2166.667 400 90 36000 74300 34300 -38300 825.5556 200 100 20000 74500 34500 -54500 745 1000 The airline is operating at too big a loss and should,therefore,cancel the flight Price is less than ATC Yes FALSE

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