Question

American to cut​ flights, charge for luggage

American Airlines announced yesterday that it will begin charging passengers​ $15 for their first piece of checked​ luggage, in addition to raising other fees and cutting domestic flights as it grapples with​ record-high fuel prices.

​Source:Boston Herald​, May​ 22, 2008

What is the influence on the supply of American Airlines​ flights?

The news clip illustrates a change in the supply of flights when it reports that American Airlines is​ _______.

A. cutting the number of flights with no mention of a change in the airfare

B. charging​ $15 for a checked​ bag, which will cut the number of air travelers

C. paying more for fuel and charging people to check a bag

D. charging​ $15 to check a bag so that it can cut the number of flights

Answer 1

The influence on the supply of American Airlines flights is increase in fuel prices. The increase is so much so that it is termed as "record- high". Since fuel prices are a necessary component of running aviation services, this increase also increases the marginal cost for the firms.

The news clip illustrates a change in the supply of flights when it reports that American Airlines is​ (C) paying more for fuel and charging people to check a bag.

Option A is incorrect as the article clearly mentions "raising other fees" which could include a change in the airfare.

Option B is incorrect since there is no motive mentioned for cutting the number of air travelers.

Option D is incorrect since charging an insignificant fee of $15 is unrelated to cutting of flights.