Question

2. Understanding the role of fixed cost in the short run Aa Aa Consider an airline's decision about whether or not to cancel a particular flight that hasn't sold out. The following table provides data on the total cost of operating a 100-seat plane for various numbers of passengers Number of Total Cost (TC) 35,000 55,000 65,000 67,000 68,000 68,500 69,000 70,000 70,500 70,800 70,900 Passengers 10 20 30 40 50 60 70 80 90 100 Given the information presented in the previous table, the total fixed cost to operate this flight is At each ticket price, a different number of consumers will be willing to purchase tickets for this flight. Use the following demand schedule to complete the questions that follovw Price (Dollars per ticket) 800 600 450 150 Quantity Demanded (Tickets per flight) 20 80 100

Answer 1

1. Fixed cost of the flight = 35000

2.

Price	Quantity demanded	Total Revenue	Total Cost	Total variable	Profit
800	0	0	35000	0	-35000
600	20	12000	65000	30000	-53000
450	80	36000	70500	35500	-34500
150	100	15000	70900	35900	-55900

The profit maximizing price is $450 per ticket, and 80 seats out of 100 will be purchased
Option 1 and 2

3. Yes, as the revenue is greater than variable cost, it can run in the short run

Price	Quantity demanded	Total Revenue	Total Cost	Total variable	Profit
800	0	0	15000	0	-15000
600	20	12000	45000	30000	-33000
450	80	36000	50500	35500	-14500
150	100	15000	50900	35900	-35900

4. False, as we can see that profit is lower even at lower price of $150 per ticket