The Civil Aeronautics Board (CAB).allowed airlines to charge prices above the equilibrium price.Even then the airlines were not profitable because:
A)their economic profits were zero.
B)nonprice competition between the airlines raised costs and eroded profits.
C)the demand was too low to make profit.
D)they were subject to heavy taxes by the government which drove down profits.

Question

Quizplus · Accepted Answer

Nonprice competition between airlines, such as advertising campaigns and adding luxurious amenities, can increase the costs for airlines and erode their profits, even if they charge prices above the equilibrium price allowed by the CAB.