An Executive,a Surfer,and a Schoolteacher Each Decide to Fly from Atlanta,Georgia,to

question 108

Multiple Choice

An executive,a surfer,and a schoolteacher each decide to fly from Atlanta,Georgia,to Honolulu,Hawaii.The schoolteacher can travel only during the months of June and July.The executive must travel in May for a meeting with her overseas board of directors.The surfer can travel anytime during the calendar year,but he faces a limited budget.The lowest airfare for each month is summarized in the following table.Assuming that the airline faces a constant cost of production each month for a flight,why is it beneficial for the airline to charge different prices each month?

• A) The airline wants to attract more business executives as customers.
• B) Because the airline is able to separate its customers into distinct groups-those who must travel during the summer months and those who can travel any time of the year-it is able to price discriminate and enjoy higher profits.
• C) The airline wants to restrict the number of customers who fly on a limited budget because it makes less profit on those ticket sales.
• D) Many schoolteachers travel with their families,so airlines prefer to make ticket prices reasonable for them.
• E) Because surfers often travel with oversized luggage,airlines want to make ticket prices attractive to these customers so that the airline can claim the extra baggage fees.

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