Which of the Following Best Explains Why Airlines Often Cut

question 152

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 Civil Aviation Authority 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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