Marginal Principle

[Katrice]

Hello. I am studying Economics & I am in need of assistance.Marginal Airlines runs 10 flights per day at a total cost of $50,000, including $30,000 in fixed costs for airport fees and the reservations system and $20,000 for flight crews and food service.A) If an 11th flight would have 25 passengers, each paying $100, would it be sensible to run the flight?B) If the 11th flight would have only 15 passengers, would it be sensible to run the flight?

 

[tkhunny]

$30,000 is fixed. Ignore that.

$20,000 is the total variable cost for 10 fights, making $2,000 / flight. (We're assuming puddle jumpers cost the same as the concorde.)

25*100 = 2500 > 2000 > 1500 = 15*100

Now what?