Elizabeth Airlines (EA) flies only one route: Chicagolong dash-Honolulu. The demand for each flight is: Upper Q equals 500 minus Upper PQ=500-P. EA's cost of running each flight is $30,000 plus $100 per passenger. What is the profit-maximizing price that EA will charge? How many people will be on each flight? What is EA's profit for each flight? (round all answers to a whole number)

Profit-maximizing price = $300

People on flight = 200 people per flight

Profit for each flight = $10,000

Explanation:

As per the data given in the question,

Demand curve in inverse form:

P = 500 - Q

We know that marginal revenue curve for a linear demand curve will twice the slope,

So Marginal Revenue = 500 - 2Q

Marginal cost of carrying per passenger = $100

To determine profit maximizing quantity, Equating Marginal Revenue to Marginal Cost

Let the people on each flight be Q, then

500 - 2Q = 100

Q = 200 people per flight

Substituting the value Q in demand equation to find profit maximizing price for each ticket

Profit Maximizing price (P) = $500 - $200

= $300

Profit for each flight = Total Revenue - Total Cost

= (300) (200) - (30,000 + (200) (100))

= $10,000 per flight