DOJ investigation prompts lawsuits alleging that airlines are fixing airfares the airline industry is highly competitive with more people flying than ever before.
Source: The Dallas Morming News, July 8, 2015
Explain how limiting the increase in capacity could lead to higher airfares.
Limiting the increase in capacity could lead to higher airfares because ,
A. airlines face a downward-sloping demand curve. The fewer seats they sell, the higher the price
B. with fewer seats available, airlines can practice price fixing
C. the market is perfectly competitive, and even in perfect competition a decrease in capacity raises air fares
D.airlines face a horizontal demand curve. When capacity decreases, the demand curve shifts upward