Delta has $100 variable cost on $500 coach class 3 week advance purchase seats from CLT to SF. The company is quite conscious of their need to sustain cumulative operating profits in order to cover their very high fixed cost of pilot crews, capital equipment leases, and hub airports.

1. The product team proposes to discount these CLT to SF routes with a 5% price cut to $475. Variable cost remains $100. What "breakpoint" % increase in unit sales of Delta seats must occur in response to the 5% price cut in order to maintain cumulative operating profits?

2. Does this unit sales increase goal seem possible? why or why not?

3. Delta's branding team simultaneously receives a $7 million ad campaign proposal from its ad agency. The incremental sales over the projected 90 day lifetime of the demand effects attributable to the ad campaign total 20,000 additional seats sold. At $475 price point and $100 variable costs, should the ad proposal be adopted or refused?