Question

An airplane is about to leave the jetway and take off with 50 empty seats. The regular coach fare is $400 for a seat, and the marginal cost of carrying an extra passenger is $30. Forty standby passengers are hoping to get on the flight. If 10 of those seats can be filled for $200, 25 seats can be filled for $100, and 40 seats can be filled at $40, what is the socially optimal fare to charge standby passengers waiting to fill those seats

Answer 1

the ariplane should sell the tickets at $100

Step-by-step explanation:

the socially optimal fare maximizes the sum of consumer and supplier surplus:

total surplus at $200 = ($200 - $30) x 10 = $1,700

total surplus at $100 = ($100 - $30) x 25 = $1,750

total surplus at $40 = ($40 - $30) x 40 = $400