Jim Johnson Operates a Bus Service to Take College Students

question 8

Essay

Jim Johnson operates a bus service to take college students to "The Big City" on Friday night and bring them back to school on Sunday night.The bus has 45 seats but sometimes there are empty seats.His records show that about 5% of ticket holders do not show up for their ride.Tickets cost $20 and are non-refundable.If Jim overbooks the bus and more than 45 passengers show up,some of them will be bumped and have to miss the trip.This bumping costs the company $40 because Jim has a double-your-money back policy for bumped passengers.Jim plans to accept 48 reservations overbook 3 seats).
$\begin{array}{|c|c|c|c|}\hline & \mathrm{A} & \text { B } & \mathrm{C} \\\hline 1 & & \text { Jim's Big City Bus } & \\\hline 2 & & \text { Reservation System } & \\\hline 3 & & & \\\hline 4 & & \text { SeatsAvailable } & 45 \\\hline 5 & & \text { Ticket Price per Seat } & \$ 20 \\\hline 6 & & \text { Prob. of No-Show } & 0.05 \\\hline 7 & & \text { Cost of Bumping } & \$ 40 \\\hline 8 & & \text { Reservations Accepted } & 48 \\\hline 9 & & & \\\hline 10 & & \text { P assengers to Board } & 47 \\\hline 11 & & & \\\hline 12 & & \text { Ticket Revenue } & \$ 960 \\\hline 13 & & \text { Opp. Cost of Empty Seats } & 0 \\\hline 14 & & \text { Cost of Bumping Passengers } & \$ 80 \\\hline 15 & & \text { Marginal Profit } & \$ 880 \\\hline & & \text { MODEL } & \\\hline\end{array}$

What is Jim Johnson's expected marginal profit?

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Definitions:

Easygoing

Characterized by a relaxed and tolerant attitude; not easily upset or stressed.

Hostile

Exhibiting or feeling aggression or anger towards someone or something, often characterized by antagonistic actions or attitudes.

Heart Disease

A range of conditions affecting the heart, such as coronary artery disease, heart attacks, congestive heart failure, and congenital heart defects.

Hostility

Aggressive behavior or attitudes directed towards others, characterized by antagonism or conflict.