2. Understanding the role of fixed cost in the 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. 144 of 144 Given the information presented in the previous table, the fixed cost to operate this flight is Number of Passengers 0 10 20 30 40 50 60 70 80 90 100 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: Price (Dollars per ticket) 1,000 700 400 200 Price (Dollars per ticket) 1,000 700 400 200 True False Total Cost (TC) 40,000 60,000 65,000 68,000 70,000 71,000 72,500 73,500 74,000 74,300 74,500 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 economic 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.) Total Revenue (TR= P x Q) Given this information, the profit-maximizing price is Quantity Demanded (Tickets) 0 30 90 100 Total Cost (TC) Variable Cost (VC) per ticket, and Profit is negative. Total revenue is greater than variable cost. The airline is operating at too big a loss and should, therefore, cancel this flight. Price is greater than average total cost. Profit (TR-TC) In this case, which of the following statements are true about the market at this price-quantity combination? Check all that apply. seats out of 100 will be purchased. If fixed cost decreases to $23,000, does this change the production decision of the airline in the short run? Yes No True or False: The decision to operate a flight in the short run depends on the relationship between total revenue and variable cost.
2. Understanding the role of fixed cost in the 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. 144 of 144 Given the information presented in the previous table, the fixed cost to operate this flight is Number of Passengers 0 10 20 30 40 50 60 70 80 90 100 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: Price (Dollars per ticket) 1,000 700 400 200 Price (Dollars per ticket) 1,000 700 400 200 True False Total Cost (TC) 40,000 60,000 65,000 68,000 70,000 71,000 72,500 73,500 74,000 74,300 74,500 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 economic 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.) Total Revenue (TR= P x Q) Given this information, the profit-maximizing price is Quantity Demanded (Tickets) 0 30 90 100 Total Cost (TC) Variable Cost (VC) per ticket, and Profit is negative. Total revenue is greater than variable cost. The airline is operating at too big a loss and should, therefore, cancel this flight. Price is greater than average total cost. Profit (TR-TC) In this case, which of the following statements are true about the market at this price-quantity combination? Check all that apply. seats out of 100 will be purchased. If fixed cost decreases to $23,000, does this change the production decision of the airline in the short run? Yes No True or False: The decision to operate a flight in the short run depends on the relationship between total revenue and variable cost.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. Understanding the role of fixed cost in the 144 of 144
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
0
10
20
30
40
50
60
70
80
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:
Price
(Dollars per ticket)
1,000
700
400
200
Price
(Dollars per ticket)
1,000
700
400
200
Total Cost
(TC)
40,000
60,000
65,000
68,000
70,000
71,000
72,500
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 economic 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.)
O True
False
73,500
74,000
74,300
74,500
Total Revenue
(TR= P x Q)
Given this information, the profit-maximizing price is
Quantity Demanded
(Tickets)
0
30
90
100
Total Cost Variable Cost
(TC)
(VC)
per ticket, and
Profit is negative.
Total revenue is greater than variable cost.
The airline is operating at too big a loss and should, therefore, cancel this flight.
Price is greater than average total cost.
Profit
(TR-TC)
In this case, which of the following statements are true about the market at this price-quantity combination? Check all that
apply.
seats out of 100 will be purchased.
If fixed cost decreases to $23,000, does this change the production decision of the airline in the short run?
Yes
No
True or False: The decision to operate a flight in the short run depends on the relationship between total revenue and variable
cost.
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