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.

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Definitions:

Working Groups

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Hawthorne Studies

A series of influential experiments in industrial organization conducted in the 1920s and 1930s at the Hawthorne Works in Chicago, highlighting the impact of work conditions on productivity.

World War II

A global conflict that lasted from 1939 to 1945, involving most of the world's nations, including all of the great powers, eventually forming two opposing military alliances: the Allies and the Axis.

Scarcity of Jobs

A situation in which there are fewer job opportunities available than there are people seeking employment, often leading to high competition for employment.