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If Whisper Wings Airlines cuts its domestic fares by 30%, _____
If Whisper Wings Airlines cuts its domestic fares by 30%, _____.
A. its fixed costs will decrease.
B. profit will increase by 30%.
C. a profit can only be earned by decreasing the number of flights.
D. a profit can be earned either by increasing the number of passengers or by decreasing variable costs.
Expert Solution
If Whisper Wings Airlines cuts its domestic fares by 30%, then d) a profit can be earned either by increasing the number of passengers or by decreasing variable costs.
If fares are highly elastic will result in more passengers, then profits can be earned by increasing ridership. Alternatively, if costs go down, then profits can be earned above previous levels at the lower fare rate.
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