An Airline Has Requests for Standby Flights at Half of the Usual

question 103

Essay

An airline has requests for standby flights at half of the usual one-way air fare. Past
experience has shown that these passengers have about a 1 in 5 chance of getting on the
standby flight. When they fail to get on a flight as a standby, the only other choice is to fly
first class on the next flight out. Suppose that the usual one-way air fare to a certain city is
$150 and the cost of flying first class is $315. Should a passenger who wishes to fly to this
city opt to fly as a standby? [Hint: Find the expected cost of the trip for a person flying
standby.]

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Definitions:

Just-in-time Inventory Systems

An inventory strategy companies use to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, reducing inventory costs.

Responsibility

involves the duty or obligation to perform or complete a task, with an inherent accountability for the successful completion and outcomes.

Vendors

Businesses or individuals that sell products or services to other businesses or consumers.

Lease Decision

The choice between leasing or purchasing an asset, involving considerations of cost, duration, and financial impact.