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Q1) Airway Express has evening flight from Los Angeles to New York with average of 80 passengers and return flight next afternoon with average of 50 passengers. Plane makes no other trip. Charge for plane remaining in New York overnight is $ 1,200 and would be zero in Los Angeles. Airline is contemplating eliminating night flight out of Los Angeles and replacing it with morning flight. Estimated number of passengers is 70 in the morning flight and 50 in the return afternoon flight. One-way ticket for any flight is $200. Operating cost of plane for each flight is $11,000. Fixed costs for plane are $3,000 per day whether it flies or not. (a) Must airline replace its night flight from Los Angeles with morning flight? (b) Must the airline remain in business?

In evening flight, total passengers = 80 + 50 = 130

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M922980

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