Public Finance (The McGraw-Hill Series in Economics)
Public Finance (The McGraw-Hill Series in Economics)
10th Edition
ISBN: 9780078021688
Author: Harvey S Rosen, Ted Gayer
Publisher: McGraw-Hill Education
Question
Book Icon
Chapter 5, Problem 1DQ
Summary Introduction

To describe: The effects of the system on the number of size the carry-ons are brought to the plane and efficiency of overhead space allocation.

Expert Solution & Answer
Check Mark

Explanation of Solution

Earlier the passengers were charged for check-in bags, they would select whether to check-in baggage or carry them in the aircraft depending on their willingness to trade time for the hassle of handling with carry-on baggage.  That is, the passengers who valued time saving by not having to deal with baggage claim will be higher than the handling cost with carry-on baggage will prefer to carry on.

The fact that passengers are now being charged for check-in bags but not for the bags carried onto the aircraft will inefficiently placed overhead space. Passengers are carrying bigger bags to save the rates charged, and resulting in full the overhead luggage containers.  Overhead spaces are used on the first come first serve bases, rather than being evenly distributed.  Bags checked (without any fees) at the gates would prefer to carry on even without any charges to have to go through checks, which will be a loss to the company.  Those who prefer to carry their baggage in order to evade the fee, but rather prefer to check their bags, also result in an inefficiency.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions Assumptions Discount rate (WACC) Common shares outstanding 7.60% 5,029.00 million Net nonoperating obligations (NNO) $(8,747) million NNO is negative, which means that Cisco has net nonoperating investments CSCO ($ millions) DCF Model Reported 2019 Forecast Horizon 2020 Est. 2021 Est. 2022 Est. 2023 Est. Terminal Period Increase in NOA FCFF (NOPAT - Increase in NOA) $ 1241 1303 1368 10673 11207 11767 1437 $ 12354 302 ✓ Present value of horizon FCFF 9918 9679 9445 ✔ 0 × Cum. present value of horizon FCFF $ 0 × Present value of terminal FCFF 0 ☑ Total firm value 0 ☑ NNO -8747 ✓ Firm equity value $ 0 ☑ Shares outstanding (millions) 5029 Stock price per share $ 40.05
Don't used hand raiting and don't used Ai solution
Don't used hand raiting and don't used Ai solution
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Text book image
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:9781260013962
Author:BREALEY
Publisher:RENT MCG
Text book image
Financial Management: Theory & Practice
Finance
ISBN:9781337909730
Author:Brigham
Publisher:Cengage
Text book image
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Text book image
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Text book image
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education