Asked by Sareine Kisimba on Sep 23, 2024
Verified
An airline's flight is about to take off.It has a few empty seats left aboard.If it lowers its prices,it can fill the remaining seats and fly at full capacity.What should be done?
A) Sell the additional standby seats at a discount since the marginal costs of the additional passenger are almost zero and fly at full capacity
B) Sell the additional standby seats without a discount
C) Don't offer the additional seats for any price
D) none of the above
Marginal Costs
The additional cost incurred in producing one more unit of a good or service, critical in decision-making regarding production volumes.
Standby Seats
Airline or event tickets made available last minute, typically at a lower price, for customers willing to wait for no-shows or extra capacity.
Full Capacity
The maximum level of output that a facility can produce under normal operating conditions.
- Investigate how different pricing tactics influence revenue creation, highlighting the importance of marginal revenue in the process.
- Evaluate practical business scenarios to make informed decisions regarding production levels and pricing strategies.
Verified Answer
SS
Shreya Sheen2 days ago
Final Answer :
A
Explanation :
Selling the additional standby seats at a discount is the best option as it allows the airline to fill the remaining seats and generate some revenue, which is better than not selling them at all. As the marginal costs of the additional passenger are low, it is feasible to offer them at a discounted rate. This will also help the airline maintain its reputation and customer relations by giving them the opportunity to travel at a lower cost.
Learning Objectives
- Investigate how different pricing tactics influence revenue creation, highlighting the importance of marginal revenue in the process.
- Evaluate practical business scenarios to make informed decisions regarding production levels and pricing strategies.