Question
Boeing airlines is a new local airline. Assume it flies regularly between Durban and Cape Town. It serves two types of customers: business travelers and
Boeing airlines is a new local airline. Assume it flies regularly between Durban and Cape Town. It serves two types of customers: business travelers and adventure seekers. Business travelers' demand function is Q1 = 21 0.1P1 and the demand function of adventure seekers is Q2 = 50 0.4P2. The firm's cost function is C(Q) = 2000 + 10Q.
1. (12 marks) How much should it charge each market to maximize its profit?
2. (8 marks) Use the second order derivatives and use Hessian determinants to confirm that your answer in (a) is the maximum profit.
Please assist with question 1 and 2?
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