Description of this paper

Elizabeth Airlines (EA) flies only one route:




Elizabeth Airlines (EA) flies only one route: Chicago-Honolulu. EA?s cost of running each flight is $30,000 plus $100 per passenger. The demand for each flight is given by the following demand schedule;Price Quantity of Flights Demanded;$500 0;$450 50;$400 100;$350 150;$300 200;$250 250;$200 300;$150 350;$100 400;a. If the firm has a single-price strategy, what is the profit-maximizing price that EA will charge (show marginal revenue and marginal cost numbers to justify your answer)? How many people will be on each flight? What is EA?s profit for each flight?;b. EA learns that the fixed costs per flight are in fact $41,000 instead of $30,000. Will the airline stay in business for long?;c. Wait! EA finds out that two different types of people fly to Honolulu (business-flyers and students) and that students represent all of the added demand that at the $200, $150, and $100 rate levels. Should EA offer a discounted student rate? Explain why or why not and, if they should offer the student discount, how large should the discount be?


Paper#24675 | Written in 18-Jul-2015

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