Answer:
The correct answer is A.
Explanation:
Low cost companies, such as Southwest, Horizon, Frontier and JetBlue, are already one of the first options when organizing a trip. Flying is easier and more accessible every day, partly thanks to the low prices that airlines offer us, but also more uncomfortable, so you may ask yourself: what tricks do airlines use to make flying so cheap now?
- Point to point routes. Low-cost companies do not offer transshipment services (network), so they save the cost of moving luggage from one plane to another and do not have to worry about the costs of connections between their routes.
- Staff costs. When operating point-to-point flights and only short and medium radius, low cost never pay hotels to their crews to spend the night outside the airport where they are destined. Pilots and cabin staff always return to their base. In addition, their salaries are usually lower than those of traditional airline personnel.
- Small airports. Operating in small airports and far from the main urban centers allows these airlines to avoid traffic jams, thus saving fuel and time.
- Homogeneous fleet. Low cost usually use modern fleets and similar models, allowing them significant savings in maintenance.
- Reduced services. These low-cost airlines do not serve meals, cut seat space and eliminate seat allocation, which saves a lot of time, but also money.
- Additional income. Most low-cost airlines promote a wide range of gifts and lotteries on board, which gives them significant extra income.
- It pays for everything. The reservation of tickets, billing at a counter and the right to carry a suitcase in the hold of the plane is paid with low-cost airlines.
- Less expenses at the airport. Many low cost even give up having customer service offices, replacing them with call centers that involve a high cost of calling.
- Public incentives. Many public administrations grant great economic aid to these low costs to prevent them from stopping to fly to their airports.
- Very high rotation. Companies basically care about two things: get the maximum number of flights and fill the planes to the maximum. A plane is only profitable when it is flying, so more flights, more profitability.
Answer:
d. $25,000
b. ($5,000) loss
Explanation:
In the first case, the gain or loss on this transaction is
Gain or loss on this transaction is
= Sale value of the land - adjusted basis of the land
= $110,000 - $85,000
= $25,000
We ignored the fair market value of the land for computing the gain or loss of the transaction
In the second case, the gain or loss on this transaction is
Gain or loss on this transaction is
= Sale value of the land - fair market value
= $80,000 - $85,000
= -$5,000 loss
Answer:
B. Firm A engaged in predatory pricing.
Explanation:
Since Firm A and B are the only two companies that sell this good
Firm A decided to price its subscriptions below average variable cost that is it lowered it's prices which made Firm B to also lower it's own, but they went bankrupt and exited the market. Firm A then raised prices by 40% and is currently earning large, positive economic profits.
Based on this, Firm A engaged in predatory pricing.
Predatory pricing is a marketing or pricing strategy that has to do with lowering the cost of goods and services for a short-term, in order to make competitors lower their price, making them to go bankrupt in the process and thereby exiting the market.
Answer:
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
Explanation:
When the demand decreases along with the decrease in supply, obviously the equilibrium quantity will also decrease, to match the level of supply and demand.
But the price cannot be fairly estimated as because the supply is decreased the prices shall increase for equilibrium but as the demand has also decreased the prices shall decrease in order to match the equilibrium.
Thus, the price is ambiguous but definitely the quantity shall stand decreased for equilibrium.
Answer:
24.73%
Explanation:
(1 + i)ⁿ = future value / present value
annual interest rate = i
n = 52 years
future value = $11,750
present value = $0.12
(1 + i)⁵² = $11,750 / $0.12 = 97,917
1 + i = ⁵²√97,917
1 + i = 1.2473
i = 1.2473 - 1 = 0.2473 = 24.73%
