Question
5. Delta Airlines is working on pricing its flights between Detroit Metro Airport and Minneapolis-St. Paul Airport. Over years of flying the route, Delta knows
5. Delta Airlines is working on pricing its flights between Detroit Metro Airport and Minneapolis-St. Paul Airport. Over years of flying the route, Delta knows that the weekly demand curve it faces for business class tickets on its own flights can be estimated by P = 4250 10Q, where Q is number of tickets and P is in dollars per ticket. Delta's marginal cost for each passenger it flies is $250. Recently, a new startup has come to Delta with a proposal. The startup claims that, using big data collected from a variety of sources, it has devised a system that can identify and charge each passenger a price equal to the maximum amount the passenger would be willing to pay for their plane ticket on the Delta flight from Detroit to Minneapolis. What's the most that Delta should be willing to pay this startup, per week, for this service? (Assuming there no changes in fixed costs from increasing or decreasing the number of tickets sold.) (a) $200,000 (b) $400,000 (c) $800,000 (d) $1,200,000 (e) $0
6. Suppose that all consumers see beer and pretzels are complementary goods. The State of Michigan imposes a new tax on beer. How will the tax on beer affect the market for pretzels (at least in the short-run)? (a) It will shift out the demand curve for pretzels and therefore shift out the supply curve of pretzels. (b) It will shift out the demand curve for pretzels and therefore increase the price of pretzels. (c) It will shift in the demand curve for pretzels and therefore decrease the price of pretzels. (d) It will shift out the supply curve of pretzels and therefore increase the price of pretzels. (e) It will shift in the supply curve of pretzels and therefore decrease the price of pretzels.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started