Valair is an airline flying a particular route that has seasonal demand.The firm's total demand is given by:Q = 600 – 4Pwhere Qis the number of passengers per year, in thousands, and Pis thefare (in £). In the peak season the demand is given by:QH = 320 – 1.5PHand in the off-season the demand is given by:QL = 280 – 2.5PLassume that fixed costs are £6 million per year and that marginal costsare constant at £60 per passenger. Thus the cost function is given by:C= 6000 + 60Qwhere C is total costs (in £'000).a. Calculate the profit-maximizing price and output without pricediscrimination, and the size of the profit.b. Calculate the profit-maximizing price and output with pricediscrimination, and the size of the profit.c. Calculate the demand elasticities of the two segments at theirprofit-maximizing prices.

On the off chance that the carrier charges similar costs in each market, we get the benefit…

Valair is an airline flying a particular route that has seasonal demand. The firm's total demand is given by: Q = 600 – 4P where Qis the number of passengers per year, in thousands, and P is the fare (in £). In the peak season the demand is given by: QH = 320 – 1.5PH and in the off-season the demand is given by: QL = 280 – 2.5PL

Valair is an airline flying a particular route that has seasonal demand. The firm's total demand is given by: Q = 600 – 4P where Qis the number of passengers per year, in thousands, and P is the fare (in £). In the peak season the demand is given by: QH = 320 – 1.5PH and in the off-season the demand is given by: QL = 280 – 2.5PL

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 1E: The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales...

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