1. Following airline deregulation, many U.S. airlines began participating in international airline alliances that link route systems and allow passengers to extend their networks without offering additional flights. Some evidence states that fares were 25% less than non-allied carriers, suggesting that alliances ________.

a. increased operational efficiencies and lowered costs for allied airlines

b. increased the ability of airlines to coordinate pricing decisions

c. substantially increased demand for international flights

d. strengthened brand loyalty among larger firms, limiting entry along allied routes

2. Although the trucking and airline industries were subject to similar regulatory practices, trucking firms earned substantial extranormal profits, whereas airline carriers did not. What might account for this difference?

a. higher price elasticity of demand for delivering freight than for passenger travel

b. greater supplier concentration in the airline industry

c. fewer options for nonprice competition in the trucking industry

d. more available close substitutes for trucking than for air travel

3. Many people who remember air travel before deregulation in 1985 reminisce about the high-quality service and superior menu options available on US domestic flights. This high-quality service was an example of ________.

a. cream skimming

b. nonprice competition

c. cross-subsidization

d. earnings sharing