Suppose an airline sells air tickets to two types of customer – business travelers and vacation travelers. Their estimated demand elasticities are -2.5 and -4.0 respectively. Suppose the marginal cost is constant at $240, and the services provided to the two types of customer are similar.  Calculate the fares the airline should charge on the air tickets sold to the respective types of customers. Show your calculations.

Andrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how much to charge to maximize profits. The demand curve for the treatments is given by the first two columns in the following table; its total costs are given in the third column. Answer the following question accordingly. Price QuantityTC $25.00 $100 $24.00 10 $250 $23.00 20 $420 $22.00 30 $600 $21.00 40 $780 $20.00 50 $970 $19.00 60 $1,170 Total fixed costs in the above table is: Select one: a. $130 b. $10 c. $100 d. Zero

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Problem 2Suppose an airline has monopoly over a certain route. The estimated price elasticity of demand for business travelers is EB=-1.9, while the price elasticity of demand for leisure travelers is EV=-2.1. The airline wants to set the prices separately for business and vacation travelers.a) If the marginal cost of transporting each passenger is the same, and the airline is able to separate the two groups perfectly, what is the optimal surcharge (in %) on business travelers? (for example, if leisure travelers pay 100, and business travelers pay 200, then the surcharge is 100%)Answer= b) Suppose that in order to separate business travelers, the airline must offer them slightly better conditions on board (for example, serve them a meal). As a result, the marginal cost of flying a business traveler is 30% higher than for a leisure traveler. What is the optimal surcharge (in %) on business travelers in this case?Answer= c) Now suppose the airline introduces a Basic Economy fare, where…