An airplane is about to leave the jetway and take off with 50 empty seats. The regular coach fare is $400 for a seat, and the marginal cost of canying an extra passenger is $30. Forty standby passengers are hoping to get on the flight. If 10 of those seats can be filled for $200, 25 seats can be filled for $100, and 40 seats can be filled at $40, what is the socially optimal fare to charge standby passengers waiting to fill those seats? Suppose the profit-maximizing airline must charge all the standby passengers the same price. Should it charge $40, $100, or $200 per ticket? Would the socially optimal result be achieved?
An airplane is about to leave the jetway and take off with 50 empty seats. The regular coach fare is $400 for a seat, and the marginal cost of canying an extra passenger is $30. Forty standby passengers are hoping to get on the flight. If 10 of those seats can be filled for $200, 25 seats can be filled for $100, and 40 seats can be filled at $40, what is the socially optimal fare to charge standby passengers waiting to fill those seats? Suppose the profit-maximizing airline must charge all the standby passengers the same price. Should it charge $40, $100, or $200 per ticket? Would the socially optimal result be achieved?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:An airplane is about to leave the jetway and take off with 50 empty seats. The regular coach fare
is $400 for a seat, and the marginal cost of canying an extra passenger is $30. Forty standby
passengers are hoping to get on the flight. If 10 of those seats can be filled for $200, 25 seats can
be filled for $100, and 40 seats can be filled at $40, what is the socially optimal fare to charge
standby passengers waiting to fill those seats?
Suppose the profit-maximizing airline must charge all the standby passengers the same price.
Should it charge $40, $100, or $200 per ticket? Would the socially optimal result be achieved?
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