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An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. How much profit will the airline earn if it engages in price discrimination? A. $75,000 B. $55,000 C. -$5,000 D. $40,000

Respuesta :

Answer:

B. $55,000

Explanation:

Total Revenue shall be as follows:

Sale of 100 tickets for $600 each = $60,000

Sale of 50 tickets for $300 each = $15,000

Total revenue = $60,000 + $15,000 = $75,000

Less: Cost = $20,000

Profit = Revenue - Cost = $75,000 - $20,000 = $55,000

Since even in case of price discrimination major tickets are at full travel price of $600, and even on price discrimination revenue is generated, with a profit of $55,000 thus price discrimination is healthy.

Final Answer

B. $55,000

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