Question

In order to remain competitive, Big Bus Lines must reduce its average ticket price by 15%. However, the firm still wants to remain profitable. Which of the following options would allow Big Bus Lines to remain profitable while dropping its ticket prices?
A : decreasing its variable costs by at least 15%
B : increasing its variable cost per ticket by at least 15%
C : decreasing its number of passengers by at least 15%
D : decreasing its total fixed costs by at least 15%

Answer 1

Answer:

A : decreasing its variable costs by at least 15%

Explanation:

Variable costs depend on the number of passengers they transport as there will be a decrease of the 15 %in the income received by each passenger. Then, it must be an equal reduction on the expenses generated by each passenger in order to remain competitive.