Due to high fixed costs of using O'Moore airport, only two airlines operate in Mooropolis: NorthbyNorth...

 

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Due to high fixed costs of using O'Moore airport, only two airlines operate in Mooropolis: NorthbyNorth West and Southby Southwest. They offer identical flight experiences, down to the snacks served. The airlines can adjust the number of flights at any time using algorithms to measure demand. The marginal cost of a flight out of Mooropolis is $25,000 and each flight can carry 100 passengers. Current demand per day (where QD is number of passengers) is: 1 QP = 1,025 5-P Assume the airlines cancel flights that do not fill up with 100 passengers. a. How many flights are scheduled for Mooropolis per day and how much profit does each airline make? b. Suppose Northby Northwest and Southby Southwest executives play a game of golf one Saturday and suddenly less flights are available and prices have really increased. As a seasoned economist in imperfect competition, what do you predict to be the total number of flights offered by the two airlines, and at what price? c. How much profit do you predict each airline to make, and how much consumer surplus has been lost? Due to high fixed costs of using O'Moore airport, only two airlines operate in Mooropolis: NorthbyNorth West and Southby Southwest. They offer identical flight experiences, down to the snacks served. The airlines can adjust the number of flights at any time using algorithms to measure demand. The marginal cost of a flight out of Mooropolis is $25,000 and each flight can carry 100 passengers. Current demand per day (where QD is number of passengers) is: 1 QP = 1,025 5-P Assume the airlines cancel flights that do not fill up with 100 passengers. a. How many flights are scheduled for Mooropolis per day and how much profit does each airline make? b. Suppose Northby Northwest and Southby Southwest executives play a game of golf one Saturday and suddenly less flights are available and prices have really increased. As a seasoned economist in imperfect competition, what do you predict to be the total number of flights offered by the two airlines, and at what price? c. How much profit do you predict each airline to make, and how much consumer surplus has been lost?

Answer rating: 100% (QA)

a To determine how many flights are scheduled for Mooropolis per day we first need to find the equilibrium price and quantity of flights We can do thi... View the full answer