A major airline estimates that the demand and marginal revenue functions for first class and excursion fares
Question:
First Class: P = 4,200 – 2Q MR = 4,200 – 4Q
Excursion: P = 2,200 – .25Q MR = 2,200 – .5Q
If the marginal cost of production is $200 per passenger, what fare and what number of passengers will maximize profit? Show that profit is greater than if the airline used a single or uniform price.
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Set MRMC 1st class 4200 4Q 200 4Q 4000 or Q 1000 To get 1000 customers price mus...View the full answer
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