Air China has started selling the air tickets for the flight 985 from Beijing to Sans Francisco on November 15. There are 250 economy class seats on board. The airline sells some economy class seats at a discount price of CNY4400 and reserve a number of seats to sell at the full price of CNY7700. Suppose that Air China can always sell all discount tickets, and the demand for full price tickets is normally distributed with a mean of 100 and a standard deviation of 25.

1. Applying the newsvemdor model, what is the underage cost?

2. Applying the newsvemdor model, what is the critical ratio of the marginal analysis?

3. What is the optimal protection level for the airline?

4. At the optimal protection level, what is the probability that all seats are sold?

5. If unsold seats may be sold at the last minute at a very reduced rate, how will this affect the optimal protection level?