If There Are Open First-Class Seats Available on a Particular

question 35

Multiple Choice

If there are open first-class seats available on a particular flight, some airlines allow customers with coach (discount) tickets to upgrade to first-class tickets during the electronic check-in process. Suppose the regular price of a first-class ticket is $800, the total price of the upgrade ticket (original price plus the upgrade) is $400, the marginal cost of serving both types of customers (full-fare and upgrade first-class flyers) is $100, and the airline maximizes profits. Which of the following statements is true?

• A) MR for the full-fare customers must be higher than the MR from upgrade customers.
• B) MR for the full-fare customers may be higher or lower than the MR from upgrades.
• C) MR = MC for the full-fare customers, but the airline is willing to collect any positive amount from the upgrade customers.
• D) MR must be the same for both full-fare and upgrade customers.

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