Taking into account my operating and fuel costs, airport charges (gotta mow the runway every so...

Taking into account my operating and fuel costs, airport charges (gotta mow the runway every so often), etc., the estimated cost per flight is $2,000. I expect to fly full flights (100 passengers…I cram them into my little Cessna), so the marginal cost on a per-passenger basis is $20 ($2,000/100). Finally, I've estimated my demand curve for the local area to be P = 120 – 0.1Q, where P is the fare in dollars, and Q is the number of passengers per week. Based on this information:

A. What fare should I charge? At this fare, how many passengers will MushAir carry, and how many flights will I have to make? What is my weekly profit? (4 points)

B. Suppose that, using all the above information, a grain company offers me $4,000 per week to haul corn to Chicago. Obviously, I will have the plane filled up with corn and won't have any passengers, so I'd have to replace one of my weekly passenger flights with the corn flight (the operating cost would be the same…I won't have to pay for in-flight entertainment, but I'll have to vacuum it out after the flight). Should I carry the corn? Why or why not? (2 points)

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