The Civil Aeronautics Board (CAB)

question 42

Multiple Choice

The Civil Aeronautics Board (CAB) .allowed airlines to charge prices above the equilibrium price.Even then the airlines were not profitable because:

• A)their economic profits were zero.
• B)nonprice competition between the airlines raised costs and eroded profits.
• C)the demand was too low to make profit.
• D)they were subject to heavy taxes by the government which drove down profits.

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Definitions:

Capital Lease

A lease agreement that is classified as a purchase of assets for accounting purposes, where the lessee assumes some of the risks and benefits of ownership.

Leased Equipment

Assets obtained for use by leasing rather than purchasing, allowing companies to use equipment without owning it.

Depreciation Expense

The allocated amount of the cost of an asset expensed each period over its useful life, reflecting wear and tear or obsolescence.

Rent Expense

Rent Expense is the cost incurred by a company or individual for the use of a property or equipment.