Elizabeth Airlines (EA) flies only one route: Chicago-Honolulu. The demand by business people for each flight is QA = 260 – 0.4P while the demand for students for each flight is QB = 240 - 0.6P. EA’s cost of running each flight is $30,000 plus $100 per passenger. The airline is able to perfectly distinguish students from business people. Which of the following statements is true? Note the demand equations must be rewritten as inverse demand equations to solve this problem.
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Elizabeth Airlines (EA) flies only one route: Chicago-Honolulu. The
demand by business people for each flight is QA = 260 – 0.4P while the demand for students for each flight is QB = 240 - 0.6P. EA’s cost of running each flight is $30,000 plus $100 per passenger. The airline is able to perfectly distinguish students from business people.Which of the following statements is true?
Note the demand equations must be rewritten as inverse demand equations to solve this problem.
A. The profict maxmizing quantity sold to students is 110 and the profit maximizing price charged to students is $375.
B. The profict maxmizing quantity sold to students is 90 and the profit maximizing price charged to students is $375.
C. The profict maxmizing quantity sold to students is 110 and the profit maximizing price charged to students is $250.
D. The profict maxmizing quantity sold to students is 90 and the profit maximizing price charged to students is $250.
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