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 profit will the airline earn if it engages in price discrimination?
A)-$5,000
B)$40,000
C)$55,000
D)$75,000

Question

Quizplus · Accepted Answer

The airline earns $60,000 from business travelers (100 x $600) and $15,000 from vacationers (50 x $300), totaling $75,000 in revenue. Subtracting the $20,000 cost, the profit is $55,000.

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