Suppose that it costs £10 000 to fly a jet from London to Amsterdam and the plane contains 100 passengers. If the number of passengers increases to 125, which of the following is likely to be true?

Suppose that it costs £10 000 to fly a jet from London to Amsterdam and the plane contains 100 passengers. If the number of passengers increases to 125, which of the following is likely to be true?

The average fixed cost per passenger will fall from £100 to £80.
The airline’s load factor will reduce.
The revenue earned by the airline will fall from £1 000 to £1 250.
The airline’s variable cost will fall.

Explanation
The average fixed cost per passenger is equal to the total fixed cost divided by the number of passengers = 10 000/100 = £100. When the number of passengers increases to 125, the average fixed cost per passenger = 10 000/125 = £80.