Question: As the exclusive carrier on a local air route, a regional airline must determine the number of flights it will provide per week and the fare it will charge. Taking into account operating and fuel costs, airport charges, and so on, the estimated cost per flight is $2,000. It expects to fly full flights (100 passengers), so its marginal cost on a per passenger basis is $20. Finally, the airline’s estimated demand curve is P=120 - .1Q, where P is the fare in dollars and Q is the number of passengers per week.

What is the airline’s profit maximizing fare? How many passengers does it carry per week, using how many flights? What is its weekly profit?