Now suppose the airline in Problem S2 can vary the number of daily departures.

a.    What is its profit-maximizing number of flights, and how many passengers of each type should it carry? (Hint: The optimal numbers of passengers, QB and QE, can be found by setting MRB = MRE = MC per seat. Be sure to translate the $20,000 marginal cost per flight into the relevant MC per seat.)

b.   Confirm your algebraic answer using the spreadsheet you created in Problem S2. (Hint: The easiest way to find a solution by hand is to vary the number of passengers of each type to equate MRs and MC;

then adjust the number of planes to carry the necessary total number of passengers.)

c.    Use your spreadsheet’s optimizer to confirm the optimal solution. (Hint: Be sure to list cell E2 as an adjustable cell.)

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