Question

In: Economics

A regional airline sells 200 tickets to New York City for an average price of $...

A regional airline sells 200 tickets to New York City for an average price of $ 150 one way. Half of the people on the flight will purchase a meal for $5.

The airline’s employee costs per flight include $500 each for the pilot and copilot, and $200 for each flight attendant. The law requires airlines to have at least one pilot, copilot, and flight attendant for each flight. Fuel for the flight is expected to cost $8,000, and the cost of catering food is $1 for each item purchased.

2nd attempt

Part 1   (2.5 points)

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The airline earns    $    in revenue from tickets and   $   from in-flight purchases.

If one flight attendant is staffed for the flight, the airline pays    $    in fixed costs.

If the airline has three flight attendants for the flight, the firm earns    $    profit.

Solutions

Expert Solution

Airline sells= 200 tickets

Price= $150

Revenue from ticket= 200 tickets x $150 = $30000

Half of people purchase meal that is 100 people

Each Meal price= $5

Revenue from in-flight purchase= $5 x 100 people= $500

The airline earns $30000 in revenue from tickets and $500 from in-flight purchases.

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If one flight attendant hired:

Cost of flight attendant= 1 x $200= $200

Cost of pilot= $500

Cost of co-pilot= $500

Fuel cost= $8000

Fixed cost= Cost of flight attendant +Cost of pilot +Cost of co-pilot +Fuel cost

Fixed cost = = $200+$500+$500+$8000= $9200

If one flight attendant is staffed for the flight, the airline pays $9200 in fixed costs.
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If 3 flight attendant hired:

Cost of flight attendant= 3 x $200= $600

Cost of pilot= $500

Cost of co-pilot= $500

Fuel cost= $8000

cost of catering= $1 x number of meal= $1 x 100= $100

Total cost= 600+500+500+8000+100= $9700

Total revenue= Revenue from ticket + Revenue from in-flight purchase= 30000+500= $30500

Profit = Total cost - Total revenue= $30500-$9700= 20800

If the airline has three flight attendants for the flight, the firm earns $20800 profit.


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