Consider an airline's decision about whether 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. Total Cost Number of Passengers (Dollars per flight) 30,000 10 45,000 20 50,000 30 53,000 40 55,000 50 57,000 60 58,000 70 58,500 80 59,000 90 59,300 100 59,500 Given the information presented in the previous table, the fixed cost to operate this flight is S At each ticket price, a different number of consumers will be willing to purchase tickets for this flight. Assume that the price of a flight is fixed for the duration of ticket sales. Use the previous table as well as the following demand schedule to complete the questions that follow. Price Quantity Demanded (Dollars per ticket) (Tickets per flight) 900 700 50 300 70 100 100 Complete the following table by computing total revenue, total cost, variable cost, and 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.) Price Total Revenue Total Cost Variable Cost Profit (Dollars per ticket) (TR) (TC) (VC) (TR-TC) (Dollars) (Dollars) (Dollars) (Dollars) 900 30,000 -30,000 700 300 100 Given this information, the profit-maximizing price is per ticket, and seats out of 100 will be purchased. In this case, which of the following statements are true about the market at this price-quantity combination? Check all that apply. O The airline is operating at too big a loss and should, therefore, cancel this flight. O Total revenue is greater than variable cost. O Profit is positive. O Price is less than average total cost.
Consider an airline's decision about whether 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. Total Cost Number of Passengers (Dollars per flight) 30,000 10 45,000 20 50,000 30 53,000 40 55,000 50 57,000 60 58,000 70 58,500 80 59,000 90 59,300 100 59,500 Given the information presented in the previous table, the fixed cost to operate this flight is S At each ticket price, a different number of consumers will be willing to purchase tickets for this flight. Assume that the price of a flight is fixed for the duration of ticket sales. Use the previous table as well as the following demand schedule to complete the questions that follow. Price Quantity Demanded (Dollars per ticket) (Tickets per flight) 900 700 50 300 70 100 100 Complete the following table by computing total revenue, total cost, variable cost, and 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.) Price Total Revenue Total Cost Variable Cost Profit (Dollars per ticket) (TR) (TC) (VC) (TR-TC) (Dollars) (Dollars) (Dollars) (Dollars) 900 30,000 -30,000 700 300 100 Given this information, the profit-maximizing price is per ticket, and seats out of 100 will be purchased. In this case, which of the following statements are true about the market at this price-quantity combination? Check all that apply. O The airline is operating at too big a loss and should, therefore, cancel this flight. O Total revenue is greater than variable cost. O Profit is positive. O Price is less than average total 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 short run
Consider an airline's decision about whether 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.
Total Cost
Number of Passengers (Dollars per flight)
30,000
10
45,000
20
50,000
30
53,000
40
55,000
50
57,000
58 000
60
00D'Rs
70
58,500
80
59,000
90
59,300
100
59,500
Given the information presented in the previous table, the fixed cost to operate this flight is S
At each ticket price, a different number of consumers will be willing to purchase tickets for this flight. Assume that the price of a flight is fixed for the
duration of ticket sales. Use the previous table as well as the following demand schedule to complete the questions that follow.
Price
Quantity Demanded
(Dollars per ticket)
(Tickets per flight)
900
700
50
300
70
100
100
Complete the following table by computing total revenue, total cost, variable cost, and 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.)
Price
Total Revenue
Total Cost
Variable Cost
Profit
(Dollars per ticket)
(TR)
(TC)
(vC)
(VC)
(TR-TC)
(Dollars)
(Dollars)
(Dollars)
(Dollars)
90
30,000
-30,000
700
300
100
Given this information, the profit-maximizing price is
per ticket, and
seats out of 100 will be purchased.
In this case, which of the following statements are true about the market at this price-quantity combination? Check all that apply.
O The airline is operating at too big a loss and should, therefore, cancel this flight.
O Total revenue is greater than variable cost.
O Profit is positive.
O Price is less than average total cost.
Ir fixed cost decreases to $12,500, does this change the production decision of the airline in the short run?
O Yes
O No
True or False: The decision to operate a flight in the short run depends on the relationship between total revenue and variable cost.
O True
O False
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