The airline industry is extremely price competitive, as well as having huge fixed costs and very low variable costs. This is an example of ____.
A) low asset performance
B) high profitability
C) high operating leverage
D) low fixed threshold

Question

Quizplus · Accepted Answer

The fact that the airline industry has huge fixed costs and very low variable costs means that it has high operating leverage, which is a measure of how sensitive a company's profits are to changes in its sales volume. As for the other options, low asset performance and low fixed threshold are not applicable to the airline industry, while high profitability is not necessarily true for all airlines, as some operate on thin profit margins.

The Airline Industry Is Extremely Price Competitive, as Well as Having