Rainbow cruises operates a week-long cruise tour through

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Rainbow Cruises operates a week-long cruise tour through the Hawaiian Islands. Passengers currently pay $1,800 for a two-person cabin, which is an all-inclusive price that includes food, beverages, and entertainment. The current cost to Rainbow per two-person cabin is $1,440 for the week-long cruise, and at this cost, Rainbow is able to earn the minimum profit margin needed to operate the business. Rainbow competes with two other cruise lines and, to date, $1,800 has been the prevailing market price for the week-long cruises. Each cruise line provides exactly the same services to their passengers, but recently one of Rainbow's competitors found a way to permanently lower its price to $1,500 per two-person cabin.

Reference no: EM13599079

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