Scenario 15-5
An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.
-Refer to Scenario 15-5. How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket?
A)$15,000
B)$25,000
C)$40,000
D)$70,000

Question

Quizplus · Accepted Answer

By charging $600 to all, the airline earns $60,000 from business travelers and $0 from vacationers, totaling $60,000. Charging $600 to business travelers and $300 to vacationers, the airline earns $60,000 + $15,000 = $75,000. The additional profit is $75,000 - $60,000 = $15,000.

Scenario 15-5 An Airline Knows That There Are Two Types of Travelers