Author Question: If there are open first-class seats available on a particular flight, some airlines allow customers ... (Read 93 times)

formula1

  • Hero Member
  • *****
  • Posts: 666
If there are open first-class seats available on a particular flight, some airlines allow customers with coach (discount) tickets to upgrade to first-class tickets during the electronic check-in process.
 
  Suppose the regular price of a first-class ticket is 800, the total price of the upgrade ticket (original price plus the upgrade) is 400, the marginal cost of serving both types of customers (full-fare and upgrade first-class flyers) is 100, and the airline maximizes profits. Which of the following statements is true? A) MR for the full-fare customers must be higher than the MR from upgrade customers.
  B) MR for the full-fare customers may be higher or lower than the MR from upgrades.
  C) MR = MC for the full-fare customers, but the airline is willing to collect any positive amount from the upgrade customers.
  D) MR must be the same for both full-fare and upgrade customers.

Question 2

In an unregulated, competitive market we could calculate consumer surplus if we knew the equations representing supply and demand. For this problem assume that supply and demand are as follows: Supply P = 4 + 0.116Q Demand P = 25 - 0.
 
  10Q, where P represents unit price in dollars and Q represents number of units sold each year. Calculate the annual value of aggregate consumer surplus.



Zack0mack0101@yahoo.com

  • Sr. Member
  • ****
  • Posts: 341
Answer to Question 1

D

Answer to Question 2

We must calculate the area above the equilibrium price and below the demand curve. The equilibrium price is:
4 + 0.116Q = 25 - 0.10Q
0.216Q = 21
Q = 97.22 units per year.

The area below the demand curve can be calculated after we know the height of demand at Q = 0 and Q = 97.22.
At Q = 0, P = 25.
At Q = 97.22, P = 25 - 0.10(97.22 ) = 15.28.
Since demand is linear, we can use the difference of 25 and 15.28 or 9.72 as the height of the space under demand.
Area = 1/2 b  h = (1/2 )(97.22 )(9.72 ) = 472.49



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Acetaminophen (Tylenol) in overdose can seriously damage the liver. It should never be taken by people who use alcohol heavily; it can result in severe liver damage and even a condition requiring a liver transplant.

Did you know?

Most strokes are caused when blood clots move to a blood vessel in the brain and block blood flow to that area. Thrombolytic therapy can be used to dissolve the clot quickly. If given within 3 hours of the first stroke symptoms, this therapy can help limit stroke damage and disability.

Did you know?

The use of salicylates dates back 2,500 years to Hippocrates’s recommendation of willow bark (from which a salicylate is derived) as an aid to the pains of childbirth. However, overdosage of salicylates can harm body fluids, electrolytes, the CNS, the GI tract, the ears, the lungs, the blood, the liver, and the kidneys and cause coma or death.

Did you know?

Signs of depression include feeling sad most of the time for 2 weeks or longer; loss of interest in things normally enjoyed; lack of energy; sleep and appetite disturbances; weight changes; feelings of hopelessness, helplessness, or worthlessness; an inability to make decisions; and thoughts of death and suicide.

Did you know?

The Food and Drug Administration has approved Risperdal, an adult antipsychotic drug, for the symptomatic treatment of irritability in children and adolescents with autism. The approval is the first for the use of a drug to treat behaviors associated with autism in children. These behaviors are included under the general heading of irritability and include aggression, deliberate self-injury, and temper tantrums.

For a complete list of videos, visit our video library