1.This diagram shows the demand for the business and leisure segments and the marginal cost for coach-class seats on a flight.

a.Complete the diagram showing the optimal quantity and price for each passenger segment.Clearly label the optimal amounts and prices.

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b.If MC decreases modestly, will the fares decrease (visualize a change in the MC curve)?

Answer:

c.Are all seats sold?If not, wouldn't the airline make more money by selling more seats at a lower price?

Answer:

d.What recommendation would you make for the fleet assignment to this route?