In the domestic airline market, where companies compete on the number of seats they make available in the market measured in millions (x), the inverse of the demand for seats is pd(x) = 40 - 4x. Assume that there are 2 airlines: LON and Pacific Airlines. The marginal cost per seat of both airlines is 10: (a) Determine the market equilibrium (quantity produced by each firm, market price and profits). Graph (b) Assume that LON and Aerolineas del Pacifico collude and act as a monopoly. Calculate the number of seats (x) and the selling price. (c) What is the efficient number of seats that should be made available to consumers, and at what price would each seat be sold?
In the domestic airline market, where companies compete on the number of seats they make available in the market measured in millions (x), the inverse of the demand for seats is pd(x) = 40 - 4x. Assume that there are 2 airlines: LON and Pacific Airlines. The marginal cost per seat of both airlines is 10: (a) Determine the market equilibrium (quantity produced by each firm, market price and profits). Graph (b) Assume that LON and Aerolineas del Pacifico collude and act as a monopoly. Calculate the number of seats (x) and the selling price. (c) What is the efficient number of seats that should be made available to consumers, and at what price would each seat be sold?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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In the domestic airline market, where companies compete on the number of seats they make available in the market measured in millions (x), the inverse of the demand for seats is pd(x) = 40 - 4x.
Assume that there are 2 airlines: LON and Pacific Airlines. The marginal cost per seat of both airlines is 10:
(a) Determine the
(b) Assume that LON and Aerolineas del Pacifico collude and act as a
(c) What is the efficient number of seats that should be made available to consumers, and at what price would each seat be sold?
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