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as the exclusive carrier on a local airline route, a regional airline must determine the number of flights it will provide and the fare it will charge. Taking into account operating and fuel costs, airport changes, and so on, the estimated cost per flight is $2,000.00. It expects to fly full flights (100 passengers), and its marginal cost on a per passenger basis is $20.00. Finally, the airline's estimated demand curve is P=120 - (0.1*Q), where P is the fare in dollars, Q is the number of passengers per week.
a) what is the airline's profit maximizing fare? How many passengers does it carry per week using how many flights? What is its weekly profit?
b) suppose the airline is offered $4,000.00 per week to haul freight along the route for a local firm. This will mean replacing one of the weekly passenger flights with a freight flight (at the same operating cost). Should the airline carry freight for the local firm? Explain.
1. We measure opportunity cost in monetary value. Suppose you spend $100 for new clothes. You will say that the clothes cost you $100. But the money you spent is not the real cost of the new clothes.
In city A, the value of an apartment falls in direct proportion to its distance from the business center. Thus an apartment one kilometer away will lose 20 percent of its value and an apt 2 kilometers away will lose 40 percent of its value.
The interest rate is tied to the economy. Based on your opinion, will the economy grow or recede for the rest of 2011 and 2012 Will the pace of growth (or recession) fast or slow The current interest rate is very low.
Robertson Inc. wishes to set aside lump sum money to withdraw from and invest in automating parts of its business over the next 5 years. This money is expected to earn compound interest at the rate of 10% per year.
Assume autonomous real investment is $30, autonomous real government spending is $30, and autonomous real net exports is -$20. Compute Aggregate Expenditures at each level of real GDP. What is the value of equilibrium real GDP
Edward the entrepreneur takes 2 hours to cut a lawn, and he cuts 1,000 lawns per year. He uses solar-powered equipment (truck and mover) that will last forever -- and could be sold at any time for $20,000.
The accountant would measure revenue-explicit cost= profit The economist would measure revenue- explicit and implicit cost=profit 200-100=100 profit YES for accountant profit 200-300=-100 deficit NO for economic profit Is this all right.
Suppose that the residents of Vegopia spend all of their income on Cauliflower, broccoli, and carrots. In 2008, they buy 100 heads of cauliflower for $200, 50 bunches of broccoli for $75, and 500 carrots for $50.
Find the Required Interest Rate Your parents will retire in 18 years. They currently have $250,000 and they think they will need $1,000,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any a..
What sum should you deposit into an account to yield 20 year end payments, starting with $10,000 at the end of the first year and increasing by 4% each year at an interest rate of 8% compounded quarterly.
Maintenance occurs every month. The cost of maintenance starts at $2250 and it will grow by $20 each time the facility is maintained. Find the value today of the maintenance costs for the next ten years if Black Cat Blades Ltd.'s
ChooChoo Paper Company makes various types of paper products. One of their products is a 30 mils thick paper. In order to ensure that the thickness of the paper meets the 30 mils specification, random cuts of paper are selected and the thickness o..
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