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Consider the following problem: A flight from Chicago to New York 2 weeks from today has 170 seats. 65 seats are “protected” as high paying and 150 are economy. • 50 of the high paying seats have been sold. • All unfilled economy seats have been auctioned off at a discount and have been sold Five days before departure another economy order arrives at the airlines reservation system. The airlines must make a decision to allocate or not allocate seats from its high paying segment to economy. Here are some profit numbers • Price of high paying seat is $700 dollars and the marginal profit is $500 • Price of economy seat is $160 dollars and the marginal profit is $100 If the airline where to allocate the vacant seats from high paying to economy, it faces the risk of “stock out”, inability to fulfil a high paying customer order because the seat has been allocated to economy, thereby earning lower marginal profit. Based on the above, answer the following questions.
1. Why do airline companies offer free upgrade to business/first class to economy passengers at the moment of departure? What are the costs and benefits of this decision?
2. Discuss the rationale underlying the airline decision to auction discount seats to third party vendors (costs and benefits)?
Discuss the relationship between the level of GDP and economic well-being. What factors of well-being are missing from the GDP? Is there a point where the GDP could increase to such a high level
Suppose you manage a plant that produces engines by teams of workers using assembly machines. The technology is summarized by the production function Q = 4KL where Q is the number of engines produced per week, K is the number of assembling machines, ..
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The version of Okun’s law assumes that with no change in unemployment, real GDP (RGDP) normally grows by 3 percent over a year. If RGDP last year was $12,375 and the unemployment rate fell by 1 percentage point from last year to this year, what would..
A market has a demand curve described by P=26-Q, a supply curve described by P=10+Q, and a price ceiling of 12. Calculate the Total Surplus of the market with the price ceiling.
Yasmine’s income this period is $500 and she is certain that her income next period is $300. The current market interest rate is 10 percent. She plans to spend exactly her current income this period and her future income next period, with no borrowin..
(Price Posting) A monopolist supplies to a market with (inverse) demand given by D(Q) = 100 ? Q. The monopolist has constant marginal cost c = 2. Compute the monopolists profit-maximizing supply choice and the corresponding mark-up over marginal cost..
The Chaplin Company issued bonds several years ago with a 6.5% coupon rate and semi-annual coupon payments. If the bonds have 12 years to maturity and Charlie requires a 4.75% rate of return for this type of investment, what is the value of the bonds..
The sale of treasury securities by the Federal Reserve will, in general
q.anthony figueroa is a cpa who works for an accounting consulting firm. his annual salary income is 70000. anthony is
What is the -maximing combination of labor and capital the firm should use? What is the resulting level of output? What is the economic profit? Is this the least costly way of of producing the profit-maximizing output?
Economists use the word "capital" to mean
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