Which of the Following Best Explains Why Airlines Often Cut

Multiple Choice

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

A) Fixed costs in the airline industry are very large, but the marginal cost of flying one more passenger is very low.
B) Airlines receive a subsidy from the government for each flight that is fully booked and departs on time.
C) The Federal Aviation Administration ranks each airline based on the percentage of flights that are fully booked. These rankings affect the decisions of firms to use a particular airline to fly their employees to business meetings.
D) Cutting prices makes the airlines more popular with their customers, who may fly with the same airline in the future as the result of buying low-price tickets.