Airline Pricing. Consider an airline that initially has a single price of $300 for all consumers. At this price, it has 120 business travelers and 60 tourists. The airline's marginal cost is $150. The slope of the business demand curve is - $4 per traveler, and the slope of the tourist demand curve is $2 per traveler. Does the single-price policy maximize the airline's profit? The airline should and it should the price it charges tourists. increase the price it charges business travelers decrease

Airline Pricing. Consider an airline that initially has a single price of $300 for all consumers. At this price, it has 120 business travelers and 60 tourists. The airline's marginal cost is $150. The slope of the business demand curve is - $4 per traveler, and the slope of the tourist demand curve is $2 per traveler. Does the single-price policy maximize the airline's profit? The airline should and it should the price it charges tourists. increase the price it charges business travelers decrease

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

G.17.

Airline Pricing. Consider an airline that initially has a single price of
$300 for all consumers. At this price, it has 120 business travelers
and 60 tourists. The airline's marginal cost is $150. The slope of the
business demand curve is - $4 per traveler, and the slope of the
tourist demand curve is $2 per traveler.
Does the single-price policy maximize the airline's profit?
The airline should
and it should
the price it charges tourists.
increase
the price it charges business travelers
decrease

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