Optimal price and output combination

Reference no: EM1367774

Assume an airline flying on the New York - Chicago route has estimated the demand curves for three different types of customers: business (no advance purchase), leisure (7 day advance purchase), and discount (14 day advance purchase) travelers.

They are:

Business: P = 600-Q and MR = 600-2Q;

Leisure: P = 500-2Q and MR = 500-4Q; and

Discount: P = 400-3Q and MR = 400-6Q

Suppose there is only one class of service, hence the marginal cost of providing the service is equal for all customers and is $200. What prices will the airline charge to each of the three different segments of customers?

Reference no: EM1367774

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