Labor Economics
7th Edition
ISBN: 9780078021886
Author: George J Borjas
Publisher: McGraw-Hill Education
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Chapter 3, Problem 11P
To determine
Explain how the state policies distort the firms profit maximization decisions.
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The airline industry was hit particularly hard after the 9/11 attacks on the World Trade Center in 2001. In 2002, Southwest Airlines, one of the healthier airline companies, decided to lengthen the useful lives of its aircraft from 22 to 27 years. Shortly thereafter, following Southwest’s lead, other airlines made the same move.Would it have changed earnings or cash flows, and if it did, would the change have been favorable or negative?
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