If Whisper Wings Airlines cuts its domestic fares by 30%,
A) its fixed costs will decrease.
B) profit will increase by 30%.
C) a profit can only be earned by decreasing the number of flights.
D) a profit can be earned either by increasing the number of passengers or by decreasing variable costs.

Question

Quizplus · Accepted Answer

By cutting domestic fares, Whisper Wings Airlines can increase the number of passengers which can lead to an increase in profit. Alternatively, the airline can also decrease variable costs such as fuel or maintenance costs to increase profitability. Fixed costs are unlikely to be affected by a fare reduction. Therefore, the best choice is D.

If Whisper Wings Airlines Cuts Its Domestic Fares by 30