Scenario 15-5 An airline knows that there are two types of travelers: business t

Question

Scenario 15-5 An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket whale there are s0 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane Suppose the cost to the airline of providimg the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc Refer to Scenario 15-S. How much additional profit can the aurline ean by charging each customer their willingness to pary relative to charging a flat price of $600 per ticket? a, $15,000 O b. $25,000 O $40,000 O d.$70,000

Explanation / Answer

When a flat price of 600 is charged for 100 seats (vacationers will not buy at 600), the revenue is 60000 and cost is 20000 and so profit is 40000. If price is charged according to willingness to pay, total revenue is 600*100 + 50*300 =75000. The profit now is 75000 - 20000 = 55000. Hence the profit is increased 15000.

Select A.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.