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

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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