An airline is considering adding a flight from Chicago to Sioux Falls.Total cost of the flight is $5,500.Variable cost is $2,000.Revenue from the flight is expected to be $3,000.Should the flight be added?
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

An airline is considering adding a flight from Chicago to Sioux Falls.Total cost of the flight is $5,500.Variable cost is $2,000.Revenue from the flight is expected to be $3,000.Should the flight be added?
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 flight should be added because the revenue ($3,000) exceeds the variable cost ($2,000), resulting in a profit increase of $1,000. Fixed costs are not considered in this decision as they are sunk costs.

An Airline Is Considering Adding a Flight from Chicago to Sioux