If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to
A) charge a stand-by passenger no less than the full fare of $500.
B) charge a stand-by passenger less than $100.
C) charge a stand-by passenger more than $500.
D) charge a stand-by passenger more than $100.
E) fill the seats at the last minute for any price.

Question

Quizplus · Accepted Answer

Charging more than the marginal cost of $100 will cover the additional cost of the passenger and contribute to fixed costs, making it profitable.

If an Airline Company Has Several Empty Seats on a Flight