Queens Airlines (QA) has only one route: Cape to Cairo. The demand for each flightis Q = 500 -P. QA's cost of running each flight is $30 000plus $100 per passenger.

Q1. What is the profit-maximizing price that QA will charge?

[1]$100

[2]$300

[3]$450

[4]$500

Q2. How many people will be on each flight?

[1]500 people

per fight

[2]200 people

per fight

[3]1000 people

per flight

[4]350 people

per flight

Q3. What is QA's profit for each flight?

[1]$25 000 per

fight

[2]$50 000 per

flight

[3]$15 000 per

flight

[4]$10 000 per

flight

Q4. QA learns that the fixed costs per flight are in fact R41

000 instead of R30 000. Will the airline stay in business in the short run?

[1]Yes, an

increase in fixed costs will not change profit maximizing price and quantity.

[2]No, it loses

R1000 on each flight.

[3]No, it would

rather lose R41 000 than stay in business.

[4]Not enough

information given to make a decision

QA finds out that two different types of people fly to Cairo.

Choice A consists of business people with a demand of?? = 260

0.4?. Choice B consists of students whose total demand is ?? = 240 0.6.

Because the students are easy to spot, QA decides to charge them different

prices.

Please answer questions 30 to 37 based on the information above.

Q1. What price does QA charge the students?

[1]$90

[2]$250

[3]$300

[4]$400

Q2. What price does it charge other customers?

[1]$110

[2]$375

[3]$650

[4]$1000

Q3. How many of each are

aboard each flight?

[1]110 business

people and 90 students

[2]100 business

people and 100 students

[3]250 business

people and 100 students

[4]650 business

people and 400 students

Q4. What would QA's profit be for each flight?

[1]$ 900

[2]$ 2500

[3]$ 2750

[4]$ 41000

Q5. Calculate the consumer surplus of each consumer group.

[1]Consumer

surplus for business people and students is $15 125 and $6750 respectively

[2]Consumer

surplus for business people and students is $ 650 and $400 respectively

[3]Consumer

surplus for business people and students is $ 10 000 for each group

[4]Consumer

surplus for business people and students is $41 000 for each group.

Q6. What is the total consumer surplus?

[1]Total

consumer surplus is $10 000

[2]Total

consumer surplus is $15 025

[3]Total

consumer surplus is $21 875

[4]Total

consumer surplus is $41000

Q7. Before QA started differentiating customers, how much was

the consumer surplus forbusiness peopleto air travel to Cairo?

[1]$650

[2]$1500

[3]$15 000

[4]$ 24500

Q8. What was the consumer surplus for students?

[1]$ 400

[2]$ 1250

[3]$ 1500

[4]$ 3000