Question
1. There used to be two airlines serving Kabralstan's only route, which connects the capital to the country's largest city. Airfares were set at $50
1. There used to be two airlines serving Kabralstan's only route, which connects the capital to the country's largest city. Airfares were set at $50 (single cabin). Each year, 5.2 mil- lion passengers flew on either of the two airlines. The variable cost of carrying one passenger was constant and equal to $10 (same for both airlines). Recently, one of the airlines was acquired by its com- petitor. Since then, fares increased to $80, the number of passengers dropped to 4.3 million passengers a year, and the cost of carrying one passenger increased to $20 per passenger.
Making (and justifying) the assumptions and approximations you deem necessary and reasonable, estimate the variation in consumer surplus (in $ and in percent terms).
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