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You run an airline. You have constant marginal costs of $10 per passenger. The inverse demand for your product is P = 200 - 0.1Q in for tourists and P = 500 - 0.2Q in for business travelers.
1. If you price discriminate, what are your optimal prices to the two types of travelers?
2. How would you prevent arbitrage?
How much is in this account after 40 years? Please do not show Excel formulas. I am looking for a standard set of equations that can be done with a simple calculator or by hand. Thanks. Will rate fast for easily understandable answers.
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