Scenario 15-6
An airline knows that there are two types of travelers: business travelers and vacationers.For a particular flight,there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket.There are 150 seats available on the plane.Suppose the cost to the airline of providing the flight is $20,000,which includes the cost of the pilots,flight attendants,fuel,etc.
-Refer to Scenario 15-6.How much profit will the airline earn if it engages in price discrimination?

Question

Quizplus · Accepted Answer

If the airline engages in price discrimination, they will sell all 150 tickets, with 100 sold to the business travelers at $600 each and 50 sold to vacationers at $300 each. This would give the airline a total revenue of ($600 x 100) + ($300 x 50) = $75,000. The cost of providing the flight is $20,000, so the profit would be $75,000 - $20,000 = $55,000. Therefore, the best choice is C.

Scenario 15-6 An Airline Knows That There Are Two Types of Travelers