Figure 8.10
-In Figure 8.10, airline Fly Smart is initially a secure monopoly between two cities X and Y at point M, serving 300 passengers per day at the profit maximizing price of $300 per ticket. What is Fly Smart's profit per ticket?

Question

Quizplus · Accepted Answer

At point M, Fly Smart is a secure monopoly, meaning that it has no competition on this particular route. Thus, it can charge the profit maximizing price of $300 per ticket, which is the price at which total revenue is maximized (i.e. the point where the demand curve intersects with the marginal cost curve).

Fly Smart's profit per ticket is equal to the price per ticket minus the marginal cost of providing that ticket. From the graph, we can see that Fly Smart's marginal cost at point M is $100 per ticket. Therefore, Fly Smart's profit per ticket is:

Profit per ticket = Price per ticket - Marginal cost per ticket
Profit per ticket = $300 - $100
Profit per ticket = $200

Therefore, the correct answer is A) $200.

Figure 8.10 -In Figure 8.10, Airline Fly Smart Is Initially a Secure