Question

14.Where to find the best travel deals

Travel discounts as high as 50 percent are available if you know where to look for them. Examples are companion and​ two-for-one sales on airlines and​ Amtrak, and​second-, third-,​ fourth-, or​ fifth-night-free deals offered by hotels. A Southwest​Airlines' senior fare can be up to 40 percent less than other discounted fares.

​Source: USA Today​, December​ 10, 2015

Read the news​ clip, then answer the following question.

​Airlines, railroads, and hotels increase profit by price discriminating because​_______.

A.

the number of units sold increases above the quantity sold by a​single-price monopoly

B.

they sell additional units for a discounted price that is greater than marginal cost

C.

average total cost decreases when discounted prices are offered

D.

demand increases when discounted prices are offered

E.

they sell additional units for a discounted price that is equal to marginal revenue

Answer 1

Ans) Rational entity thinks at the margin. Firms are more concerned about the marginal cost and benefits.

The plane will fly whether one passenger is sitting or ten. So, if it is able to cover its marginal cost, for example- food costs, it will take additional passengers.

Option b.