An airline decides to sell 5 unoccupied seats on a flight from California to Chicago at $300 each,which is less than its average cost per ticket of $450 each.Which of the following might have prompted this decision to sell tickets below cost?

Question

Quizplus · Accepted Answer

The decision to sell tickets below cost is based on marginal costs, which refer to the cost of producing one additional unit. In this case, the airline has already incurred the fixed costs of operating the flight, such as fuel, salaries, and maintenance. The 5 unoccupied seats represent additional units that have little or no incremental cost to the airline, and by selling them for a price lower than the average cost per ticket, the airline can generate some revenue to offset its fixed costs. Therefore, the best choice is C) Marginal costs.

An Airline Decides to Sell 5 Unoccupied Seats on a Flight