An Executive, a Surfer, and a Schoolteacher Each Decide to Fly

question 88

Multiple Choice

An executive, a surfer, and a schoolteacher each decide to fly from Atlanta, Georgia, to Honolulu, Hawaii. The schoolteacher can travel only during the months of June and July. The executive must travel in May for a meeting with her overseas board of directors. The surfer can travel anytime during the calendar year but he faces a limited budget. The lowest airfare for each month is summarized in the following table. Assuming that the airline faces a constant cost of production each month for a flight, why is it beneficial for the airline to charge different prices each month? $\begin{array}{lr}\text { Jaruary } & \$ 8 04 \\\text { February } & \$ 8 04 \\\text { March } & \$ 843 \\\text { April } & \$ 843 \\\text { May } & \$ 1,052 \\\text { June } & \$ 943 \\\text { July } & \$ 945 \\\text { August } & \$ 8 25 \\\text { September } & \$8 04 \\\text { October } & \$ 8 04 \\\text { November } & \$ 8 25 \\\text { December } & \$ 820\end{array}$

• A) The airline wants to attract more business executives as customers.
• B) Because the airline is able to separate its customers into distinct groups-those who must travel during the summer months and those who can travel any time of the year-it is able to price-discriminate and enjoy higher profits.
• C) The airline wants to limit the number of customers who fly on a limited budget because it makes less profit on those ticket sales.
• D) Many schoolteachers travel with their families, so airlines prefer to make ticket prices reasonable for them.
• E) Because surfers often travel with oversized luggage, airlines want to make ticket prices attractive to these customers so that the airline can claim the extra baggage fees.

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Definitions:

Alternative Hypotheses

In statistical hypothesis testing, the hypothesis that proposes a difference or effect, contrasting the null hypothesis.

Paranormal Researcher

A person who investigates phenomena that cannot be explained by known scientific laws.

UFO

Unidentified Flying Object, often associated with claims of visitation by extraterrestrial life or military secrets.

Null Hypotheses

A hypothesis that suggests there is no statistical significance in a set of given observations.