Question:
The global commercial airline industry has experienced a substantial amount of volatility since the financial crises of 2007-2008. The price of oil rose sharply in mid 2008, then declined just as dramatically a few months later, then rose again for a sustained period of time, until prices began to fall in mid-2014. Consider the periods when oil prices were high. During these periods, increased fuel costs were passed along to consumers as increased airfares and air travel declined. Certain airlines had to reduce flights during these periods or even temporarily stop operations. To examine the situation facing one airline. Let’s consider a hypothetical airline, Fenwick Air. Assume that the total cost function for Fenwick Air is given by
