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An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. How much profit will the airline earn if it engages in price discrimination

Answer :

Answer:

The answer is "$55000".

Explanation:

When discrimination against prices is practicable, $600 would be charged to travelers and $300 to tourists. Now,

Total revenue(TR) [tex]=P \times Q[/tex]

                               [tex]=600\times 100+300 \times 50 \\\\ =600\times 100+15,000 \\\\ =60,000+15,000 \\\\=\$75,000[/tex]

Total Cost(TC)[tex]=\$20000[/tex]

Profit[tex]=TR-TC[/tex]

           [tex]=\$75000-\$20000 \\\\ =\$55,000[/tex]

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