The Accompanying Table Summarizes Information About Each Potential Passenger's Age

question 54

Multiple Choice

The accompanying table summarizes information about each potential passenger's age and his or her maximum willingness to pay for a solo skydiving experience from SkyMasters, Inc. The aircraft has room for eight people, including the pilot and skydiving instructor. The marginal cost of adding each additional passenger is $100. SkyMasters, Inc. holds significant market power for its region. Use this information to answer the questions. $\begin{array}{lll}&\text { Maximum }\\\text { Customer }&\text { Willingness to Pay }&\text { Age }\\\text { Harold } & \$ 400 & 50 \\\text { Jay } & \$ 300 & 45 \\\text { Leslie } & \$ 350 & 42 \\\text { Kristen } & \$ 250 & 21 \\\text { Ivana } & \$ 200 & 20 \\\text { Matt } & \$ 150 & 18\end{array}$
-If SkyMasters, Inc. decides to price-discriminate based on age, which customer(s) will not skydive based on the price that should be offered to his, her, or their age group.

• A) Jay
• B) Harold and Jay
• C) Kristen and Harold
• D) Matt
• E) Ivana

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Definitions:

Interest Rate

The percentage charged by a lender to a borrower for the use of assets, typically expressed as an annual percentage of the principal.

Normal Return

The minimum profit necessary to keep a company in business, regarded as the cost of capital in the long run.

Investment

The allocation of resources, usually money, in order to earn a future return or profit.