Quantico Australian Airlines faces the following annual demand function for its Los Angeles–Sydney route: Q(p) = 38,658 – 8.67P, where Q is the number of tickets sold and P is the average ticket price. The regression analysis also produced the following statistics: coefficient of determination, 0.73; and standard error of the estimate, 4,200. Quantico’s marginal cost per seat is $150 for all foreseeable levels of output.

a. What is the profit-maximizing price for this route (assume single pricing)?

b. What is the sales revenue-maximizing price?

c. Calculate the price elasticity of demand at the profit-maximizing price and comment on the value obtained.

d. At the profit-maximizing price, what is the 95% confidence interval for sales?

e. What other qualifications and assumptions underlie your prediction?