The Economics of Flying: How Competitive Are the Friendly Skies?

What was the role of the Civil Aeronautics Board before 1978?

• To regulate airline prices and routes

• To provide free meals on flights

• To design aircrafts

• To manage airport security

Who led the effort to deregulate the airline industry in the late 1970s?

• Herb Kelleher

• Alfred Kahn

• Jimmy Carter

• Orville Wright

What was one of the main goals of the Airline Deregulation Act?

• To improve in-flight meals

• To reduce airport congestion

• To make airfares more affordable

• To increase the number of airlines

What is a characteristic of an oligopoly?

• Few firms with considerable market power

• Firms with no control over prices

• Many firms with identical products

• Single firm with no competition

What happened to airfares between 1976 and 1990 after adjusting for inflation?

• Decreased by 30 percent

• Increased by 30 percent

• Doubled

• Remained the same

What is one unintended consequence of lower airfares?

• Increased number of airlines

• Decline in flying experience quality

• Improved flying experience

• More legroom for passengers

What is a fixed cost for airlines?

• Aircraft maintenance

• Salaries

• Buying aircraft fleets

• Fuel

What is a variable cost for airlines?

• Buying aircraft fleets

• Fuel

• Aircraft maintenance

• Airport fees

What is the result of economies of scale in the airline industry?

• More small airlines

• Higher airfares

• A few large companies dominating

• Increased competition

What happened to the number of major airlines between 2005 and 2015?

• Remained the same

• Decreased to 4

• Doubled

• Increased to 15