Question

QUICK is an air shuttle service that runs between LA and Portland. The fixed costs of a flight from LA to Portland are $50,000. One of these Portland to LA flights has only one empty seat. There are 100 seats all together. What is the marginal cost to QUICK of flying one more passenger?

Answer 1

The marginal cost of transporting the 100th passenger will be = Total cost of transporting 100 passengers - Total cost of transporting 99 passengers.

Now, total cost consists of fixed costs and variable costs. Fixed cost will remain the same irrespective of whether 99 passengers are flying or 100 passengers are flying. Therefore, the marginal cost of flying the 100th passenger will be equal to the additional variable cost incurred by the airline. If there is no variable cost, the marginal cost of flying one more person will be zero.