In: Economics
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)
See Hint
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.
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.
----------------------------------------------------------------------------------------------------------------------------------------------------------
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.
----------------------------------------------------------------------------------------------------------------------------------------------------------
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.