Question

An airline sells 120 tickets for a flight that seats 100. Each ticket is non-refundable and costs $200. The unit cost of flying a passenger (fuel, food, etc.) is $80. If the flight is overbooked, each person who does not find a seat is given $300 in cash. Assume it is equally likely that any number of people between 91 and 120 show up for the flight. Rounded to the nearest thousand (e.g., 18500 rounds to 19000), on the average how much expected profit (ignoring fixed cost) will the flight generate?

Answer 1

Answer:

Expected profit = Profit of the fixed 90 customers + Probable profit or loss from the next 30 customers.

Profit per customer who books a ticket = $200 - $80 = $120

Loss per customer if the ticket is refunded = $200 - $300 = -$100.00

Now,

Probability of each customer traveling for the next 30 customers would be 1/30

So,

Probable profit or loss from the next 30 customers

= Total profit from 10 passengers till 100th passenger x Probability + Total loss from the extra 20 passengers x Probability of loss

= $120 x 10 x 1/30 - $100 x 20 x 1/30 = -$26.67

Expected profit

= 90 x $120 - $26.67

= $10,773, which rounds to $11,000.

Step-by-step explanation:

hope it will help you better

Answer 2

Answer:

1

Step-by-step explanation: