There Is Much Evidence to Suggest That Airlines Are More

question 207

Multiple Choice

There is much evidence to suggest that airlines are more likely to match price cuts than price increases.Which of the following best explains this evidence?

• A)The law of demand which states that an increase in price leads to a decrease in quantity demanded.
• B)No one airline wants to be the first to renege on a tacit collusive agreement in which all airlines implicitly agree to match price cuts but not price increases.
• C)An airline fears that if it does not match a price cut, its sales may fall considerably but if it does not match a price increase, it will be able to attract customers away from its rivals.
• D)Airlines have different costs of production and therefore it is more difficult to agree on a price increase than on a price decrease.

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Definitions:

China

A country in East Asia, known as the world's most populous nation with a continuous culture stretching back nearly 4,000 years.

United States

The United States is a country in North America, known for its significant influence on global economic, political, and cultural affairs.

Trade

The trading of goods, services, or a combination of both among two or more entities.

Large Cities

Urban areas with a large population density and extensive systems for housing, transportation, sanitation, utilities, land use, and communication.