MindTap-Cengage Learning#!&parentid;=224853848-Microsoft Edge ng cengage.com/sta
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MindTap-Cengage Learning#!&parentid;=224853848-Microsoft Edge ng cengage.com/static/nb/ui/index.html?nbid-61 3134&nbNodeld-224853847;&deploymentid;=567366729497 1628362 3863 78&elSBN-9781; 337096577#!&parentld-252524964; MINDTAP Tyler Fisher 20 pt - Graded Homework-Should I Stay, or Should I Go? Due on Tomorrow at 11:59 PM EST 1. Should airlines operate flights with empty seats? Read the Aplia-authored article in the following scrollbox and then answer the subsequent question. Should I Stay, or Should I Go? By the Aplia Economics Content Team In difficult financial times coupled with high gas prices, the airline industry is just one of the many facets of the U.S. economy that must come to grips with shrinking revenues and rising costs. The solution that many airlines have adopted is to simply cancel flights with low ridership. For example, in February 2011, Horizon Air decided to cancel the 5:30 PM flight from Pasco to Seattle and the 6:30 PM Source: SXC hu. flight from Seattle to Pasco, because both flights are typically less than half full ("Horizon Air to Cut Flight from Pasco to Seattle," Josh Peterson, Assoclated Press, KAPPTV, Feb. 25, 2011). The economic question is whether or not this is actually profit maximizing in the short run. A novice economist might prematurely think that it must be better for the airline to cancel a flight rather than to operate it with so many empty seats. Although this may be true in the long run-that is, when there are no fixed costs, so a long enough period of time where capital (such as planes) can be sold off, staff can be restructured, hubs can be reorganized, and so on-in the short run, all that matters is covering variable costs. A firm maximizes economic profit when marginal revenue is equal to marginal cost. Recall 3:41 PM O Type here to search ^4 ENG 11/19/2017Explanation / Answer
If total revenue is greater than total variable costs, the airline should sell a positive quantity of tickets.
This statement holds good as profit will be attained when the firm is covering the fixed costs and the variable costs. Even if it covers the variable costs it is still making profits and will be beneficial to sell the tickets.
If it is profitable for an airline to sell positive quantity of tickets the quantity where marginal revenue equals marginal cost is profit maximising.
We know that the profit maximising condition is attained where MR = MC. So it will be profitable for the airline to sell the tickets .