Changes in net revenue from price discriminationConsider the market for airline tickets on Flying High Airlines from Los Angeles to Chicago. The following graph shows the demand curve, marginal revenue (MR) curve, and marginal cost (MC) curve for this particular flight. In particular, the cost of adding another passenger to an otherwise empty seat is constant at $150. For simplicity, assume throughout this question that there are no supply constraints caused by seating capacity limitations.Suppose Flying High Airlines sells each seat on the plane for the same price.Place the purple point (diamond symbol) on the graph at the profit-maximizing price and quantity. Dashed drop lines will automatically extend to both axes. Then, place the grey rectangle (star symbols) to shade the area representing net operating revenue at the profit-maximizing price and quantity.Suppose now that Flying High Airlines discovers that business travelers’ demand for airline tickets is more inelastic than that of vacationers, retirees, and students. For price discrimination to be implemented, there must be a way of distinguishing between business and nonbusiness customers. Suppose Flying High Airlines successfully segments its market into business travelers and all other travelers by charging higher ticket prices to people who don’t stay over a weekend, who spend only a day or two at their destination, or who make reservations a short time before their flight. The following graph shows the company’s demand curve and marginal cost (MC) curve.Point A indicates the price charged to business travelers ($300) and the number of business travelers (40). Point B indicates the price charged to other travelers ($200) and a total of 80 travelers who would buy tickets at this price if the market were not segmented. However, since 40 business travelers purchase tickets for $300, the number of other travelers who would purchase tickets at $200 each is 80−40=40 passengers.Place the purple rectangle (diamond symbols) on the following graph to shade the area representing Flying High Airlines’s net operating revenue from business travelers. Then place the green rectangle (triangle symbols) to shade the area representing Flying High Airlines’s net operating revenue from ticket sales to other travelers. Suppose now that Flying High Airlines discovers that business travelers' demand for airline tickets is more inelastic than that of vacationers, retirees,and students. For price discrimination to be implemented, there must be a way of distinguishing between business and nonbusiness customers.Suppose Flying High Airlines successfully segments its market into business travelers and all other travelers by charging higher ticket prices to peoplewho don't stay over a weekend, who spend only a day or two at their destination, or who make reservations a short time before their flight. Thefollowing graph shows the company's demand curve and marginal cost (MC) curve.Point A indicates the price charged to business travelers ($300) and the number of business travelers (40). Point B indicates the price charged toother travelers ($200) and a total of 80 travelers who would buy tickets at this price if the market were not segmented. However, since 40 businesstravelers purchase tickets for $300, the number of other travelers who would purchase tickets at $200 each is 80 – 40 = 40 passengers.Place the purple rectangle (diamond symbols) on the following graph to shade the area representing Flying High Airlines's net operating revenue frombusiness travelers. Then place the green rectangle (triangle symbols) to shade the area representing Flying High Airlines's net operating revenue fromticket sales to other travelers.500NR Business400A300NR OtherВ200MC100Demand4080120160200QUANTITY (Passengers per flight)When Flying High Airlines price discriminates, itits net operating revenue byPRICE (Dollars per ticket) 7. Changes in net revenue from price discriminationConsider the market for airline tickets on Flying High Airlines from Los Angeles to Chicago. The following graph shows the demand curve, marginalrevenue (MR) curve, and marginal cost (MC) curve for this particular flight. In particular, the cost of adding another passenger to an otherwise emptyseat is constant at $150. For simplicity, assume throughout this question that there are no supply constraints caused by seating capacity limitations.Suppose Flying High Airlines sells each seat on the plane for the same price.Place the purple point (diamond symbol) on the graph at the profit-maximizing price and quantity. Dashed drop lines will automatically extend to bothaxes. Then, place the grey rectangle (star symbols) to shade the area representing net operating revenue at the profit-maximizing price and quantity.500Profit Max.400300Net Revenue200MC100MRDemand4080120160200QUANTITY (Passengers per flight)Suppose now that Flying High Airlines discovers that business travelers' demand for airline tickets is more inelastic than that of vacationers, retirees,and students. For price discrimination to be implemented, there must be a way of distinguishing between business and nonbusiness customers.Suppose Flying High Airlines successfully segments its market into business travelers and all other travelers by charging higher ticket prices to peoplewho don't stay over a weekend, who spend only a day or two at their destination, or who make reservations a short time before their flight. Thefollowing graph shows the company's demand curve and marginal cost (MC) curve.Point A indicates the price charged to business travelers ($300) and the number of business travelers (40). Point B indicates the price charged toother travelers ($200) and a total of 80 travelers who would buy tickets at this price if the market were not segmented. However, since 40 businesstravelers purchase tickets for $300, the number of other travelers who would purchase tickets at $200 each is 80 – 40 = 40 passengers.PRICE (Dollars per ticket)

Question

Changes in net revenue from price discriminationConsider the market for airline tickets on Flying High Airlines from Los Angeles to Chicago. The following graph shows the demand curve, marginal revenue (MR) curve, and marginal cost (MC) curve for this particular flight. In particular, the cost of adding another passenger to an otherwise empty seat is constant at $150. For simplicity, assume throughout this question that there are no supply constraints caused by seating capacity limitations.Suppose Flying High Airlines sells each seat on the plane for the same price.Place the purple point (diamond symbol) on the graph at the profit-maximizing price and quantity. Dashed drop lines will automatically extend to both axes. Then, place the grey rectangle (star symbols) to shade the area representing net operating revenue at the profit-maximizing price and quantity.Suppose now that Flying High Airlines discovers that business travelers’ demand for airline tickets is more inelastic than that of vacationers, retirees, and students. For price discrimination to be implemented, there must be a way of distinguishing between business and nonbusiness customers. Suppose Flying High Airlines successfully segments its market into business travelers and all other travelers by charging higher ticket prices to people who don’t stay over a weekend, who spend only a day or two at their destination, or who make reservations a short time before their flight. The following graph shows the company’s demand curve and marginal cost (MC) curve.Point A indicates the price charged to business travelers ($300) and the number of business travelers (40). Point B indicates the price charged to other travelers ($200) and a total of 80 travelers who would buy tickets at this price if the market were not segmented. However, since 40 business travelers purchase tickets for $300, the number of other travelers who would purchase tickets at $200 each is 80−40=40 passengers.Place the purple rectangle (diamond symbols) on the following graph to shade the area representing Flying High Airlines’s net operating revenue from business travelers. Then place the green rectangle (triangle symbols) to shade the area representing Flying High Airlines’s net operating revenue from ticket sales to other travelers. Suppose now that Flying High Airlines discovers that business travelers' demand for airline tickets is more inelastic than that of vacationers, retirees,and students. For price discrimination to be implemented, there must be a way of distinguishing between business and nonbusiness customers.Suppose Flying High Airlines successfully segments its market into business travelers and all other travelers by charging higher ticket prices to peoplewho don't stay over a weekend, who spend only a day or two at their destination, or who make reservations a short time before their flight. Thefollowing graph shows the company's demand curve and marginal cost (MC) curve.Point A indicates the price charged to business travelers ($300) and the number of business travelers (40). Point B indicates the price charged toother travelers ($200) and a total of 80 travelers who would buy tickets at this price if the market were not segmented. However, since 40 businesstravelers purchase tickets for $300, the number of other travelers who would purchase tickets at $200 each is 80 – 40 = 40 passengers.Place the purple rectangle (diamond symbols) on the following graph to shade the area representing Flying High Airlines's net operating revenue frombusiness travelers. Then place the green rectangle (triangle symbols) to shade the area representing Flying High Airlines's net operating revenue fromticket sales to other travelers.500NR Business400A300NR OtherВ200MC100Demand4080120160200QUANTITY (Passengers per flight)When Flying High Airlines price discriminates, itits net operating revenue byPRICE (Dollars per ticket) 7. Changes in net revenue from price discriminationConsider the market for airline tickets on Flying High Airlines from Los Angeles to Chicago. The following graph shows the demand curve, marginalrevenue (MR) curve, and marginal cost (MC) curve for this particular flight. In particular, the cost of adding another passenger to an otherwise emptyseat is constant at $150. For simplicity, assume throughout this question that there are no supply constraints caused by seating capacity limitations.Suppose Flying High Airlines sells each seat on the plane for the same price.Place the purple point (diamond symbol) on the graph at the profit-maximizing price and quantity. Dashed drop lines will automatically extend to bothaxes. Then, place the grey rectangle (star symbols) to shade the area representing net operating revenue at the profit-maximizing price and quantity.500Profit Max.400300Net Revenue200MC100MRDemand4080120160200QUANTITY (Passengers per flight)Suppose now that Flying High Airlines discovers that business travelers' demand for airline tickets is more inelastic than that of vacationers, retirees,and students. For price discrimination to be implemented, there must be a way of distinguishing between business and nonbusiness customers.Suppose Flying High Airlines successfully segments its market into business travelers and all other travelers by charging higher ticket prices to peoplewho don't stay over a weekend, who spend only a day or two at their destination, or who make reservations a short time before their flight. Thefollowing graph shows the company's demand curve and marginal cost (MC) curve.Point A indicates the price charged to business travelers ($300) and the number of business travelers (40). Point B indicates the price charged toother travelers ($200) and a total of 80 travelers who would buy tickets at this price if the market were not segmented. However, since 40 businesstravelers purchase tickets for $300, the number of other travelers who would purchase tickets at $200 each is 80 – 40 = 40 passengers.PRICE (Dollars per ticket)

Accepted Answer

Given,
Marginal cost MC = $ 150 per seat
In the diagram, the profit-maximizing quantity (Q) is…