Suppose the costs (in cents) per passenger-mile of operating a jumbo jet on flig

Question

Suppose the costs (in cents) per passenger-mile of operating a jumbo jet on flights of 1,200 and 2,500 miles with 250, 300, and 350 passengers aboar are:

Miles

Pass 1,200 2,500

250       4.3   3.4

300       3.8   3.0

350       3.5   2.7

A. What is the Marginal cost of one more passenger on a 1,200 mile flight if there are between 250-300 passengers.

B. If the number of passengers is 300 and the flight is between 1,200 and 2,500 miles, what is the marginal cost of flying an additional mile?

C. What would the fare on a 2,500 mile flight have to be for a company to cover the operating costs?

Explanation / Answer

A) the change per mile per passenger is ( 300 * 3.8 - 250 * 4.3 ) / ( 300 - 250 ) = 1.3 cents

B) cost of additional mile = ( 2500 * 3 - 1200 * 3.8 ) / ( 2500 - 1200 ) = 2.26cents

C) the fare is 2500 * 3.4 = 8500 for 250 passengeers

2500 * 3 = 7500 for 300 passengers

2500 * 2.7 = 6750 for 350 passengers

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