-An airline is considering adding a flight from Chicago to Sioux Falls.Revenue from the flight is expected to be $3,000.The total cost of the flight is $5,500, and the variable cost is $2,000.Should the airline add this flight?
A)No, the revenue ($3,000) is below the cost ($5,500).
B)No, the addition to profit is very small and not worth the effort.
C)Yes, profit increases by $1,000 ($3,000 − $2,000).
D)Yes, profit increases by $3,000.

Question

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-An airline is considering adding a flight from Chicago to Sioux Falls.Revenue from the flight is expected to be $3,000.The total cost of the flight is $5,500, and the variable cost is $2,000.Should the airline add this flight?
A)No, the revenue ($3,000) is below the cost ($5,500). 
B)No, the addition to profit is very small and not worth the effort. 
C)Yes, profit increases by $1,000 ($3,000 − $2,000). 
D)Yes, profit increases by $3,000.

Quizplus · Accepted Answer

The correct answer is C because the decision should be based on comparing the additional revenue to the variable costs, not the total costs. Since the revenue ($3,000) exceeds the variable cost ($2,000), the flight would contribute $1,000 towards covering fixed costs and potentially generating profit.

​ -An Airline Is Considering Adding a Flight from Chicago to Chicago

-An Airline Is Considering Adding a Flight from Chicago to Chicago