2. Understanding the role of fixed cost in the short run Consider an airline\'s

Question

2. Understanding the role of fixed cost in the short run 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 Total Cost Passengers (TC) 0 10 20 30 50 60 70 80 90 100 25,000 35,000 40,000 43,000 45,000 46,000 47,000 47,700 48,000 48,200 48,100 Given the indormation presented in the previous table, the fixed cost to operate this flight is

Explanation / Answer

2. Tc at zero is fixed cost = 25000

P TR TC VC Profit 700 0 25000 - - 550 22000 45000 20000 -23000 200 12000 47000 22000 -35000 100 10000 48100 23100 -38100 profit max. output = none it should buy 0 tickets The airline is operating at a loss, and should cancel the flight P TR TC VC Profit 700 0 11500 - - 550 22000 33500 8500 -11500 200 12000 35500 10500 -23500 100 10000 36600 11600 -26600 No False.

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