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?

Answer 1

Answer:

decreasing its variable costs by at least 15%

Explanation:

Big Bus Lines case study:-

The firm has reduced the price of the ticket by 15%. There are a number of ways through which the firm, Big Bus lines can still profitable. The correct option is:-

decreasing its variable costs by at least 15%

Variable costs:-

They the costs which change as quantity of services or goods which are produced by the business changes. Variable costs are sum of the marginal costs over all the business' units produced.

Thus, reducing the costs by same percentage can help the firm to remain profitable.