Question 2

In March 2021 Qantas introduced flights to the regional centre of Mount Gambier in South Australia. For the prior 14 years, the regional airline, REX, had a monopoly on this air service. The ABC news item is available at:

https://www.abc.net.au/news/2021-03-28/qantas-flights-arrive-in-mount-gambier/100028410?utm_source=abc_news_web&utm_medium=content_shared&utm_content=mail&utm_campaign=abc_news_web

Part (a)

Assuming a single price, illustrate on a diagram and explain how REX would have previously determined the profit maximising price for flights and numbers of flights they offered. (Again, you do not need to show numbers on your diagram).

Part (b)

If the single price assumption is relaxed, what pricing strategies may REX have previously employed?

Part (c)

With the introduction to the market of Qantas, explain the new market structure for flights to this regional centre?

Part (d)

What changes are consumers likely to see?

[6 + 5 + 4 + 5 =20 marks]