4. Until recently, the market for air travel within Europe was highly regulated. Suppose that, for a given European air

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4 Until Recently The Market For Air Travel Within Europe Was Highly Regulated Suppose That For A Given European Air 1 (43.25 KiB) Viewed 63 times

4. Until recently, the market for air travel within Europe was highly regulated. Suppose that, for a given European air route (say, London to Rome), annual air travel demand is estimated to be Q- 1,500-3P, where Q is the number of trips in thousands and P is the one-way fare in dollars. In addition, the long-run average (one-way) cost per passenger along this route is estimated to be $200. a. Some economists have suggested that during the 1980s and 1990s there was an implicit cartel among European air carriers whereby the airlines charged monopoly fares under the shield of regulation. Find the profit-maximizing fare and the annual number of passenger trips. b. In the last five years, deregulation has been the norm in the European market, and this has spurred new entry and competition from discount air carriers such as Ryanair and EasyJet. Find the price and quantity if perfect competition became the norm. to MD- MC TI 500 030- 300 x 0..-150