Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should
A)sell the ticket because the marginal benefit exceeds the marginal cost.
B)sell the ticket because the marginal benefit exceeds the average cost.
C)not sell the ticket because the marginal benefit is less than the marginal cost.
D)not sell the ticket because the marginal benefit is less than the average cost.

Question

Quizplus · Accepted Answer

The airline should sell the ticket because the marginal benefit ($300) of selling the ticket to a standby passenger exceeds the marginal cost ($200) of flying an additional passenger.

Suppose the Cost of Flying a 200-Seat Plane for an Airline