Question

Please answer the following questions in a couple sentence each following are 3 parts to one question to the assigment

1a) Are airlines considered to be selling a homogeneous product? Why or why not?

1b) Are airlines considered to be selling a homogeneous product? Why or why not?

1c) Is it true that a monopoly can charge any price and customers will still have to buy the product? Do you agree or disagree? Why?

Answer 1

part a and b are the same questions.

a&b) airlines are not considered to be selling homogenous product. Homogenous products are identical products but airlines provide differentiated products. All airlines provide flying services but quality provided by each one of them differs due to which they charge different prices.

c) I disagree, monopoly cannot charge any price. It is true that price need not equal marginal cost but there is a limit to increasing price because if price is too high there will be fewer buyers and profit will be lower. Thus to maximise profits monopoly charges maximum willingness to pay for output of consumers.