Question

DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1,100, of which $800 are fixed costs already incurred. Expected revenues from the flight are $600. DASH should: Group of answer choices not add this flight because total costs exceed total revenue. not add this flight because it is not profitable at the margin. not add this flight because only flights which cover their full costs are profitable. add this flight because marginal revenue exceeds marginal costs.

Answer 1

Answer: add this flight because marginal revenue exceeds marginal costs.

Explanation:

Since the total cost of the flight would be $1,100, of which $800 are fixed costs already incurred, then the variable cost in this case will be )$1100 - $800) = $300.

Since the expected revenues from the flight are $600, thus implies that the total revenue exceeds total variable cost and therefore Dash should add the flight because total revenue is more than total variable cost and the marginal revenue exceeds marginal costs.