Solve the following problem statement-

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Delta Airlines has frequent (every hour or every two hours) flights between key metropolises in the Northeast - they call these flights the "Delta Shuttle" service. At the time of writing this problem set, the Shuttle service is offered between New York and Boston (LGA-BOS), DC (LGA-DCA), and Chicago (LGA-ORD).

In the late 90s, Delta offered special student pricing on the Boston route, perhaps due to the fact that Boston is a college city (Boston University, Boston College, MIT, Harvard, etc.), but then discontinued the program in early 2000. Now Delta is re-considering decisions on their shuttle route. The MD-88 plane has 148 seats and the Embraer 175 has 76 seats.

4. find marginal cost (MC)? How will you find it? Why do you think this?

5. What is the maximum profit Delta can earn by flying the Embraer 175?

a. Should they offer different student v business passenger pricing?

b. What pricing should they sell seats at? What quantity will they sell, what will be their revenue, and what will be their profit? If you answered yes in (5a), give the price and quantity for each youth and business segment.

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Delta Airlines Aircraft Operating Costs Cost Per Block Hour (Block Hour is the time from gate departure to gate arrival) E-175 $4,457 MD-88 $6,128 Pilots Salaries and Wages Pilot Training Benefits and Payroll Taxes Per Diem/ Personnel $592 $363 $6 $175 $48 Pilots Salaries and Wages Pilot Training Benefits and Payroll Taxes Per Diem/ Personnel $686 $458 $8 $172 $47 Purchased Goods Fuel/Oil Insurance Other (inc. Tax) $2,263 $2,250 $13 $0 Purchased Goods Fuel/Oil Insurance Other (inc. Tax) $3,463 $3,450 $13 $0 Maintenance Labor Materials Third Party Total Direct Burden $1,267 $65 $168 $270 $485 $279 Maintenance Labor Materials Third Party Total Direct Burden $1,387 $56 $163 $337 $556 $274 Aircraft Ownership Rentals Depreciation and Amortization $104 $68 $36 Aircraft Ownership Rentals Depreciation and Amortization $203 $123 $79 Other $230 Other $391 Week Price Business Quantity Busine Price Youth Quantity Youth 19 $ 190 82 $ 86 8 20 $ 190 87 $ 86 8 21 $ 200 76 $ 90 7 22 $ 200 73 $ 90 7 23 $ 200 85 $ 90 8 24 $ 200 81 $ 90 8 25 $ 200 78 $ 90 8 26 $ 205 75 $ 92 8 27 $ 205 84 $ 92 7 28 $ 205 75 $ 92 6 29 $ 205 85 $ 92 7 30 $ 205 74 $ 92 7 31 $ 195 80 $ 88 8 32 $ 195 77 $ 88 8 33 $ 195 74 $ 88 9 34 $ 195 82 $ 85 9 35 $ 195 91 $ 85 9 36 $ 185 89 $ 85 9 37 $ 185 86 $ 83 9 38 $ 185 82 $ 83 9 39 $ 185 95 $ 83 9 40 $ 185 84 $ 83 10 41 $ 175 102 $ 79 11 42 $ 175 92 $ 79 10 43 $ 175 92 $ 70 12 44 $ 175 92 $ 70 11 45 $ 175 87 $ 70 13 46 $ 175 92 $ 70 12 47 $ 165 95 $ 74 12 48 $ 165 94 $ 74 12 49 $ 165 92 $ 74 12 50 $ 175 92 $ 79 9 51 $ 175 92 $ 79 11 52 $ 175 93 $ 10