If a commercial airline starts offering maxi-saver fares at huge discounts to passengers who purchase tickets at least 30 days in advance and agree to stay over a Saturday night, what is the most likely effect upon first-class passenger service?
A) First-class fares will rise somewhat to compensate for the loss on other fares.
B) The demand for first-class service may fall somewhat because the price of a substitute good has decreased substantially.
C) The marginal cost of first-class service will rise somewhat because the total cost must be allocated among all passengers.
D) The marginal revenue from first-class service will rise somewhat because first-class service is now more clearly a superior good.
Question 2
Which of the following is an example of marginal analysis?
A) To determine the optimal number of workers, a firm calculates the net benefits of hiring an extra worker.
B) To determine the optimal amount of fertilizer to be used, a farmer calculates the total benefits of using a given amount of fertilizer.
C) To choose the optimal apartment to rent, an individual estimates the net benefits of renting an apartment close to his place of work.
D) To determine the optimal output that a firm should sell, the manager calculates the total revenue earned by selling different levels of output.
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