Delta Airlines is working on pricing its own flights between Detroit Metro Airport and Minneapolis-St. Paul...

 

Transcribed Image Text:

Delta Airlines is working on pricing its own flights between Detroit Metro Airport and Minneapolis-St. Paul Airport. Over years of flying the route, Delta knows that the weekly demand curve it faces for business class tickets on its own flights can be estimated by P = 4250-10Q, where Q is number of tickets and P is in dollars per ticket. Delta's marginal cost for each passenger it flies is $250. 1. [2 points] Assuming Delta can only set a single price for business class tickets, what price will it charge? How many tickets will it sell? What will its weekly profits be? 2. [3 points] Recently, a new startup has come to Delta with a proposal. The startup claims that, using big data collected from a variety of sources, it has devised a system that can identify and charge each individual passenger a price equal to the maximum amount the passenger would be willing to pay for their plane ticket on the Delta flight from Detroit to Minneapolis. What's the most that Delta should be willing to pay this startup, per week, for this service? (Assume that implementing this service would not change the fixed or variable costs for Delta, other than the amount they pay for the service.) Delta Airlines is working on pricing its own flights between Detroit Metro Airport and Minneapolis-St. Paul Airport. Over years of flying the route, Delta knows that the weekly demand curve it faces for business class tickets on its own flights can be estimated by P = 4250-10Q, where Q is number of tickets and P is in dollars per ticket. Delta's marginal cost for each passenger it flies is $250. 1. [2 points] Assuming Delta can only set a single price for business class tickets, what price will it charge? How many tickets will it sell? What will its weekly profits be? 2. [3 points] Recently, a new startup has come to Delta with a proposal. The startup claims that, using big data collected from a variety of sources, it has devised a system that can identify and charge each individual passenger a price equal to the maximum amount the passenger would be willing to pay for their plane ticket on the Delta flight from Detroit to Minneapolis. What's the most that Delta should be willing to pay this startup, per week, for this service? (Assume that implementing this service would not change the fixed or variable costs for Delta, other than the amount they pay for the service.)

Answer rating: 100% (QA)

To determine the price Delta should charge for business class tickets and the corresponding weekly p... View the full answer