Asked by
Josefina Sanders
on Oct 25, 2024
Verified
Two small airlines provide shuttle service between Las Vegas and Reno. The services are alike in every respect except that Fly Right bought its airplane for $500,000, while Fly by Night rents its plane for $30,000 a year. If Fly Right were to go out of business, it would be able to rent its plane to another airline for $30,000. Which airline has the lower costs?
A) Fly Right.
B) Fly by Night
C) Neither, the costs are identical.
D) Neither, Fly by Night has lower costs at small output levels and Fly Right has lower costs at high output levels.
Shuttle Service
A shuttle service is a public or private transport service that offers frequent trips between two fixed points, often used in airport or hotel transfers.
Fly By Night
A term describing businesses or individuals that appear transient, unreliable, or not committed to long-term obligations.
Output Levels
The quantity of goods or services produced by a company or an economic system within a specific period.
- Master the basic ideas related to fixed, variable, and total costs in the context of economic decision-making.
- Understand the implications of fixed costs in the short and long term.
Verified Answer
HK
Learning Objectives
- Master the basic ideas related to fixed, variable, and total costs in the context of economic decision-making.
- Understand the implications of fixed costs in the short and long term.