Question

An airline's daily fixed cost of serving a particular route market is $5000. The demand curve in this market is P(Q) = 100 0.2Q where Q stands for number of passengers. When a uniform price is charged, the marginal revenue will be MR(Q) The marginal cost of operating flights in the market is MC(Q) = 120 - 0.6Q and the average variable cost is AVC(Q) = 120 0.3Q. = 100 – 0.4Q.

(a) How many passengers should be served to maximize profit from operating in this market?

(b) At the optimal output level, how much will be the variable cost, total cost and profit (or loss)?

(c) If the market condition keeps the same next week, should the airline keep operating in this route market?​

Answer 1

Answer:

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