Answer to Question #131104 in Economics of Enterprise for Anne fernandez

Question

2.Southwest Airlines is known for offering cut-rate promotional fares to build customer awareness, increase market share and boost revenues in new markets. Would you expect total revenue to be maximized at an output level that is typically greater than or less than the short-run profit-maximizing output level? Is such an approach incompatible with long-run profit maximization?

Answer 1

We would expect total revenue to be maximized at an output level that is typically greater than the short-run profit-maximizing output level.

Such an approach is incompatible with long-run profit maximization.