If there are only two airlines that fly between Dallas and New Orleans,what will happen in the market for one airline if the other one goes out of business?
A)The demand curve will shift to the right.
B)The demand curve will shift to the left.
C)There will be a movement to the right along the initial demand curve.
D)There will be a movement to the left along the initial demand curve.

Question

Quizplus · Accepted Answer

If one airline goes out of business, the other airline will have a monopoly in the Dallas-New Orleans route. With no substitutes available, the demand for the remaining airline's flights will increase, leading to a rightward shift in the demand curve of that airline. This will enable the remaining airline to charge higher prices and enjoy higher profits.

If There Are Only Two Airlines That Fly Between Dallas