Which of the Following Best Explains Why Airlines Often Cut

question 158

Multiple Choice

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

• A)Fixed costs in the airline industry are very large, but the marginal cost of flying one more passenger is very low.
• B)Airlines receive a subsidy from the government for each flight that is fully booked and departs on time.
• C)The Federal Aviation Administration ranks each airline based on the percentage of flights that are fully booked. These rankings affect the decisions of firms to use a particular airline to fly their employees to business meetings.
• D)Cutting prices makes the airlines more popular with their customers, who may fly with the same airline in the future as the result of buying low-price tickets.

---

Definitions:

Improve Equality

Efforts or policies aimed at reducing disparities and achieving fairness and equal opportunity in society.

Market Economy

An economic system where decisions regarding investment, production, and distribution are driven by the market's supply and demand forces.

Prices Reflect

The concept that prices in a market represent information about the value of goods and services, influenced by supply, demand, and costs.

Productivity

The measure of efficiency of production, often expressed as the ratio of outputs to inputs in a production process.