Question

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should____________.

Answer 1

Answer:

correct answer is Sell the ticket because the marginal benefit exceeds the marginal cost

Explanation:

given data

plane = 200-seat

cost of flying = $100,000

empty seats = 10

marginal cost = $200

standby passenger willing to pay  = $300

solution

as here we know Marginal benefit is $300 while marginal cost is $200

so as when airline continue to fill up remaining empty seats till marginal benefit is as that big as marginal cost

when marginal benefit is less than marginal cost so then airline stop selling