Please note that this question has not yet been graded. I keep getting the error message saying that the question cannot be answered due to it being graded and it hasn't. Thank you. ---### Changes in Net Revenue from Price DiscriminationConsider the market for airline tickets on WestEast Airlines from San Francisco to Chicago. The following graph shows the demand curve, marginal revenue (MR) curve, and marginal cost (MC) curve for this particular flight. In particular, the cost of adding another passenger to an otherwise empty seat is constant at $160. For simplicity, assume throughout this question that there are no supply constraints caused by seating capacity limitations.Suppose WestEast Airlines sells each seat on the plane for the same price.**Instruction:**Place the purple point (diamond symbol) on the graph at the profit-maximizing price and quantity. Dashed drop lines will automatically extend to both axes. Then, place the grey rectangle (star symbols) to shade the area representing net operating revenue at the profit-maximizing price and quantity.**Graph Explanation:**The provided graph is a typical illustration of how price discrimination can affect net revenue. Here's a detailed description:- The vertical axis represents the **Price (Dollars per ticket)**.- The horizontal axis represents the **Quantity (Passengers per flight)**.- The **Demand curve** (blue line) shows the relationship between the price of tickets and the quantity of tickets demanded.- The **Marginal Revenue (MR) curve** (light blue line) shows the additional revenue from selling one more ticket.- The **Marginal Cost (MC) curve** (orange line) is a horizontal line representing the constant cost of $160 for every additional passenger.**Steps to Determine the Profit-Maximizing Point:**1. Identify where the MR curve intersects the MC curve. This intersection determines the profit-maximizing quantity.2. Extend a vertical dashed line from this intersection to the horizontal axis to determine the quantity (Q).3. Extend a horizontal dashed line from this intersection to the vertical axis to determine the price (P).**Placing the Purple Diamond Point:**- This point should be located at the intersection of the MR and MC curves, which indicates the profit-maximizing price and quantity.- In the graph, the diamond symbol is located at that point, and the dashed lines show the corresponding price and quantity.**Shading the Net Revenue Area:**- Next, place the star symbols to create a rectangle that represents the area of net revenue. - This rectangle's height is the difference between the price and the marginal cost ($P - $MC), and its width ### Economic Concepts in Airline Pricing**Homework (Ch 10)**Suppose now that WestEast Airlines discovers that business travelers' demand for airline tickets is more inelastic than that of vacationers, retirees, and students. For price discrimination to be implemented, there must be a way of distinguishing between business and nonbusiness customers. Suppose WestEast Airlines successfully segments its market into business travelers and all other travelers by charging higher ticket prices to people who don’t stay over a weekend, who spend only a day or two at their destination, or who make reservations a short time before their flight. The following graph shows the company’s demand curve and marginal cost (MC) curve.- **Point A** indicates the price charged to business travelers ($320) and the number of business travelers (40). - **Point B** indicates the price charged to other travelers ($240) and a total of 80 travelers who would buy tickets at this price if the market were not segmented. However, since 40 business travelers purchase tickets for $320, the number of other travelers who would purchase tickets at $240 each is $80 - 40 = 40$ passengers.**Instructions:**- Place the purple rectangle (diamond symbols) on the following graph to shade the area representing WestEast Airlines’s net operating revenue from business travelers.- Then place the green rectangle (triangle symbols) to shade the area representing WestEast Airlines's net operating revenue from ticket sales to other travelers.**Graph Analysis:**The graph below illustrates the demand curve (downward sloping blue line), the marginal cost curve (horizontal orange line labeled "MC"), and two points (A and B).- **X-axis (Quantity):** Represents the number of passengers per flight, ranging from 0 to 220.- **Y-axis (Price of tickets):** Reflects the price in dollars per ticket, ranging from $0 to $420.**Key Points on the Graph:**- **Point A (Diamond symbol):** Located at 40 passengers and $320 per ticket.- **Point B (Triangle symbol):** Located at 80 passengers and $240 per ticket.**Revenue Areas:**- Purple shaded area for business travelers' revenue (higher price per seat, fewer seats).- Green shaded area for other travelers' revenue (lower price per seat, more seats).**Conclusion:**When WestEast Airlines price discriminates, it [increases/decreases] its net operating

Price discrimination occurs when the seller is charging different prices to different consumers for…

7. Changes in net revenue from price discrimination Consider the market for airline tickets on WestEast Airlines from San Francisco to Chicago. The following graph shows the demand curve, marginal revenue (MR) curve, and marginal cost (MC) curve for this particular fight. In particular, the cost of adding another passenger to an otherwise empty seat is constant at $160. For simplicity, assume throughout this question that there are no supply constraints caused by seating capacity limitations. Suppose West East Airlines sells each seat on the plane for the same price. Place the purple point (diamond symbol) on the graph at the profit-maximizing price and quantity. Dashed drop lines will automatically extend to both axes. Then, place the grey rectangle (star symbols) to shade the area representing net operating revenue at the profit-maximizing price and quantity. Profit Max Net Revenue 8 320 PRICE (Dolars per ticket) 8 240 B 80 QUANTITY (Passengers per fight) Demand 200

7. Changes in net revenue from price discrimination Consider the market for airline tickets on WestEast Airlines from San Francisco to Chicago. The following graph shows the demand curve, marginal revenue (MR) curve, and marginal cost (MC) curve for this particular fight. In particular, the cost of adding another passenger to an otherwise empty seat is constant at $160. For simplicity, assume throughout this question that there are no supply constraints caused by seating capacity limitations. Suppose West East Airlines sells each seat on the plane for the same price. Place the purple point (diamond symbol) on the graph at the profit-maximizing price and quantity. Dashed drop lines will automatically extend to both axes. Then, place the grey rectangle (star symbols) to shade the area representing net operating revenue at the profit-maximizing price and quantity. Profit Max Net Revenue 8 320 PRICE (Dolars per ticket) 8 240 B 80 QUANTITY (Passengers per fight) Demand 200

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The graph input tool Some questions allow you to interact indirectly with a graph by manipulating a corresponding table of entries. In this type of question, you will not be graded on the final appearance of the graph, but rather you will use the graph to help you answer the questions that follow. You can adjust the values in the accompanying table for fields with white backgrounds. Once you have selected a field, you can either enter a new value or adjust the existing value by selecting the arrows (+ to increase and to decrease). You can exit the entry field by hitting Enter (or Return) on your keyboard or by selecting a place elsewhere on the problem. To reset a field to its starting value, select the circular refresh arrow that appears next to the selected field. Experiment with entering different values in the editable fields. Observe what changes take place on the graph itself and also in the uneditable fields in the table. Don't worry about understanding the economics behind the…
How did you get the productivity of the new unit. What formula is used?
Describe the various efficiencies that can be applied when we select an analysis period?
How is MC calculated? 300 for the first MC is incorrect.
what is the terminology for this definition below: Year serving as point of comparison for other years
I just went to check my answers for question 4 and 5 on the homework. These questions are based off of the other questions 1-3 that I have already answered. I have answer 4 and 5 but not sure if they are right. I have attached all questions.
If the short run is 18 months does it follow that the long run is longer than 18 months?
Calculate the value of Average revenue for 4 units sold when the total revenue is $100