An airline has exclusive landing rights at the local airport. The airline flies one flight per day to New York City with a plane that has a seating capacity of 100. The cost of flying the plane per day is $4,000 + 10q, where q is the number of passengers. The number of seats to New York demanded is q = 165 - .5p and so marginal revenue is 330 - 4q. Assume the airline maximizes monopoly profits. (i) What will be the difference between the marginal cost of flying an extra passenger and the amount the marginal passenger is willing to pay to fly to New York City? (ii) What is the loss of consumer surplus from not filling the plane on each flight? (iii) Would it possible to reduce DWL to zero for this market? Explain

An airline has exclusive landing rights at the local airport. The airline flies one flight per day to New York City with a plane that has a seating capacity of 100. The cost of flying the plane per day is $4,000 + 10q, where q is the number of passengers. The number of seats to New York demanded is q = 165 - .5p and so marginal revenue is 330 - 4q. Assume the airline maximizes monopoly profits. (i) What will be the difference between the marginal cost of flying an extra passenger and the amount the marginal passenger is willing to pay to fly to New York City? (ii) What is the loss of consumer surplus from not filling the plane on each flight? (iii) Would it possible to reduce DWL to zero for this market? Explain

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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