Answer to Question #283185 in Economics for Mike mudenda

Question

suppose that flying a 70 seat cost $7000. this simply means that the average cost of each seat is $100. this economically means that the airline should not sell a ticket for less than $100. if however, the plane is about to take off with 10 empty seats and stand by passengers are waiting at the gate willing to pay $70. instead of the plane taking off with 10 empty seat, the airline,allows the stand by passengers to fill up the plane at $70 and were set to take off. kindly apply principles of economics to explain the scenario

Answer 1

In this case getting total revenue of 60×100 + 10×70 = 6,700 is better than 60×100 = 6,000, and the costs in both cases are the same. So, the profit in case of taking 70 passengers is higher.